Gold was steady on Thursday but under pressure as the US dollar held onto the previous day’s gains, pushing oil lower and weakening bullion’s appeal both as an anti-inflation tool and an alternative currency.
Spot gold was quoted at $900.50/901.50 an ounce by 0310 GMT, marginally up from $899.65/901.05 an ounce in New York on Wednesday. “A firmer dollar and weaker oil are two negatives for gold. So gold could easily underperform oil,” said Mark Pervan, senior commodities analyst with ANZ. “If oil falls 3-4% this week, gold could fall 4-5%,” Pervan added, predicting that gold prices could fall to $880 an ounce by the end of this week, and $850 next week before bottoming out.
Gold has already fallen some $35 an ounce from last week’s $935.30-high, which was its highest in a month and came after oil hit an all-time peak of $135.09 a barrel. The dollar on Thursday clung to gains made in the previous session after stronger-than-expected US durable goods orders eased concerns about the US economy outlook.
The dollar index, which measures the dollar’s value against a basket of major currencies, dipped to 72.506. DXY, but still kept much of the gains made on Wednesday when it rose around 0.3%. The stronger dollar also added a bearish tone to oil prices, which have failed to reach new records for a week as several developing nations in Asia have cut subsidies, possibly prompting a drop in Asian energy demand.
Gold tends to move in line with oil prices as dearer crude boosts bullion’s appeal as a hedge against inflation. (Reuters)