Gold eases as dollar ticks up, oil slips

LONDON - Gold prices slipped on Friday as the dollar recovered some losses against the euro, but firm demand from investors in physical bullion supported the market.

By (Reuters)

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Published: Fri 22 Aug 2008, 7:07 PM

Last updated: Sun 5 Apr 2015, 11:56 AM

Gold edged down to $828.00/829.00 an ounce in European trade by 1006 GMT from $832.40/833.40 an ounce late in New York. New York gold futures for December delivery slipped $3.70 an ounce to $835.30.

‘Right now, I would distinguish between longer-term investors and smaller investors who believe jewellery demand is going to pick up in the next few months, and speculative holders who are getting out of the market,’ said Commerzbank analyst Eugen Weinberg.

The dollar recovered against a basket of currencies on Friday, dampening earlier gains in the precious metal. Gold is often bought as an alternative investment to the dollar, and tends move in the opposite direction to it.

Traders paused in their profit taking on the US currency ahead of a speech from Federal Reserve chairman Ben Bernanke later in the session.

Oil prices also slipped after surging nearly 5 percent on Thursday, its biggest percentage gain in more than two months, as tensions between Russia and the US escalated. Crude slid below $121 a barrel on Friday.

However, analysts were positive for the outlook for gold.

‘A longer period of consolidation in the $800-$840 (range) would help gold establish a much stronger base, offering the physical base more time to adjust to higher prices,’ said analyst James Moore.

The precious metal surged on Thursday to a one-week high of $839.00 as dollar weakness fuelled interest in commodities as an asset class, and as demand for physical gold soared.

The Reuters/Jeffries CRB global commodities index is on track for its biggest weekly gain since 1975.

Demand for coins, bars surges

Although it is currently on the back foot, gold is up around $60 an ounce from the nine-month low of $773 it reached last Friday, as investors in coins and bars piled back into the market.

The US mint said in a statement on Thursday that it was temporarily suspending sales of its American Eagle bullion coins due a shortage as demand soared.

European traders also reported that producers were struggling to keep up with demand for some finished products.

‘This shows there is real demand (for gold),’ said Weinberg.

‘Now we have tensions between Russia and NATO, we have financial market risk,’ he said. ‘US real interest rates are still negative, which makes the opportunity cost of holding gold lower. There are so many reasons for gold to become stronger.’

Among other precious metals, silver slid to $13.59/13.65 an ounce from $13.80/13.87 an ounce.

Spot platinumeased to $1,440.00/1,460.00 an ounce from $1,449.50/1,469.50 an ounce late in New York, having hit a 1-week high of $1,472.50 an ounce earlier on Friday.

Its sister metal palladium inched up to $287.50/295.50 an ounce from $286.00/294.00 an ounce.

Both the platinum group metals are recovering after suffering a major sell-off in the wake of a spate of bad financial reports from carmakers, who consume around half of the world's platinum each year.

Analysts feared lower demand from carmakers could weigh on prices later in the year. Both metals however are benefiting from renewed buying interest as prices reach lower level.

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