Gold prices hit a one-week high on Thursday, fortified by investor buying as oil prices rose, the dollar slipped, equities fell and on expectations of strong physical demand over coming months.
Gold rose to $824.20 an ounce, the highest since August 14, and was up at $820.90/821.90 an ounce at 0937 GMT from $810.35/811.75 an ounce late in New York on Wednesday. Analysts said many investors and traders, who had sold their holdings in recent weeks as the dollar strengthened, were now feeling their way back into the market.
Demand for gold in top consumer India fell sharply after prices hit a record high of $1,030.80 in March. Analysts say that is changing and as the country heads into the festival and wedding season, demand will rise. “There are signs that physical demand is rising sharply in response to low prices, ” said Eugen Weinberg, commodities analyst at Commerzbank. “Indian jewelers, for example, are paying far bigger premiums to gold importers in order to meet the rise in demand. Indian demand should rise rapidly over the next few months, especially with the country’s main religious holidays approaching, which should provide an additional boost.”
A weaker US currency makes commodities priced in dollars cheaper for holders of other currencies. Investors often use gold as a hedge against financial turmoil and inflation, often triggered by high oil prices.
The dollar fell as higher oil prices and growing concerns about the stability of the financial sector in the United States took the steam out of its recent rally. European equities fell to three-week lows on Thursday as oil prices revived inflation concern, financial stocks slid and worries about US mortgage lenders Freddie Mac and Fannie Mae mounted. Oil prices rose for the third consecutive day after a deal between the United States and Poland to station parts of a US Missile defense shield on Polish soil angered Russia. “Oil prices at current levels could attract further investment fund flows into precious metals,” Standard Bank said in a note, adding that technical signals indicate precious metals are due for a correction.
Technical analysts expect gold to build a strong base above the $800 an ounce level. They reckon the precious metal could see $900 an ounce before the end of the year. In platinum, palladium and silver, the thinking is also that the recent sell-off has been overdone and that a bounce is due. But over the longer term, analysts expect platinum’s fortunes to be tied to the health of the global car industry, which in recent months has experienced sharply declining sales.
Spot platinum was firmer at $1,385/1,405 an ounce from $1,368.50/1,388.50 an ounce late on Wednesday, palladium at $285/293 from $281/289 and silver edged up to $13.43/13.49 from $13.15/13.21. (Reuters)