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Gold surges above $980 mark briefly on weak dollar, high oil prices

Gold remained strong in late Asian trade and surged above $980 briefly as the US dollar continued to decline, approaching a record low against the euro.

The weakening dollar boosted the appeal of the precious metal as an alternative investment and helped push oil prices higher, which in turn bolstered demand for gold as a hedge against inflation. At 5.05 p.m., gold futures for August delivery traded at $979.70 per ounce, off a high of 982.0 and a low of 970.50, against a close of $973.70 on the New York Mercantile Exchange yesterday. Trading levels breached the four-month high of $969.10 recorded on March 19.

In the Hong Kong spot bullion market, Loco London 100 was quoted at $978.5/979.5 per ounce at 4.07 p.m. local time, against 971.30/971.30 in early afternoon and 965.0/972.60 late yesterday. “The weakening dollar is now the main driver of soaring gold prices,” said Wallace Ng, chief trader for Asia-Pacific in Fortis Bank Hong Kong’s commodities derivatives department.

The dollar continued to decline against key currencies, approaching a record low against the euro as Washington’s emergency plans to support mortgage lenders Fannie Mae and Freddie Mac failed to reassure the market.

In late Asian trade, the euro was approaching the $1.60 mark, while the pound rose above $2.00 for the first time since the beginning of the month and was at a three-and-a-half month high. “The slump in Wall Street also drives some moneys out of equity markets. Some of the money will find its way into commodities, including gold,” Ng said. Gold could see a technical correction to around $960 after it hits a further high of around $988 -probably in near term, he said. But it will resume the uptrend quickly as the dollar will likely continue to be haunted by the US financial woes, Ng said.

Alex Tse, a senior vice president at Emperor Bullion Investment (Asia) Ltd, also expects gold prices to continue to trend higher, citing high oil prices, weakness in the dollar and deepening problems in the US financial sector. “And if earnings due to be reported later this week by some major US corporations fall below expectations and if people take a view that the US economy is headed for a recession, this will drive further...safe-haven buying of gold,” he said. Tse also believes gold will face resistance around the $985 level. “Gold has gained over $60 an ounce over the past week and I believe the current price has already priced in much of the bad news since last week,” Tse said.

In Asian afternoon trade, New York’s main oil contract, light sweet crude for August delivery, held firm above $145 a barrel amid continued geo-political tensions in the Middle East, and after workers at a Brazilian state-run energy firm began a five-day strike. (Xinhua)