Gold off 2-week high, eyes dollar

LONDON - Gold drifted lower on Thursday on profit-taking from two-week highs, with dealers keeping a close eye on the dollar for short-term price direction.

By (Reuters)

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Published: Thu 13 Dec 2007, 6:40 PM

Last updated: Sat 4 Apr 2015, 9:39 PM

Gold dipped to $808.85/809.55 an ounce by 1120 GMT from $813.50/814.20 in New York late on Wednesday, when it hit $817 after the US Federal Reserve and other central banks announced plans to improve liquidity in the financial markets.

“At the moment, I think people are taking a view that this may stabilise the situation so there is less reason for panic,” said Stephen Briggs, economist at SG Corporate and Investment Banking, referring to the move by central banks.

“The dollar is marginally stronger. Gold can’t go up really that much if the dollar is not going down.There are also signs that people are winding down for Christmas now and that runs the risk of volatility.”

The US Federal Reserve and counterparts in Europe, Canada and Britain had banded together to stem a mounting credit crisis, in their first coordinated action since terror attacks shut down US financial markets on Sept. 11, 2001.

The Bank of Japan also joined in saying it would ensure stable money markets by conducting appropriate operations such as supplying year-end funds.

“Both oil and the dollar look set to provide price direction in the coming sessions, but for the moment gold appears comfortable trading around the $795-$815 area, with further rallies likely to be used as profit-taking opportunities ahead of year-end,” said in a note.

“Investment demand is still strong though, reflecting the unease in the financial markets,” it said.

The latest data showed gold held in New York-listed StreetTRACKS Gold Shares, the world’s largest gold-backed ETF, rose to a record high of 615.90 tonnes on Wednesday.

Dollar watched

The dollar marginally gained against the euro, while oil prices eased below $94 a barrel, taking a breather after a rally of almost 5 percent in the previous session.

A firmer dollar makes gold costlier for holders of other currencies and often lowers bullion demand. The metal is also often seen as a hedge against oil-led inflation.

In other markets, the benchmark October 2008 gold contract in Tokyo ended 34 yen per gram higher at 2,935 yen. The most-active February contract on the US Futures exchange fell $5.1 to $813.50 per ounce in electronic trade.

J.P. Morgan was bullish on gold in the long-run. It increased its gold price forecast for next year to $814 per ounce from $716 and for 2009 to $767/ounce from $698.

“With the impact of the sub-prime issue in the US continuing to unfold, gold’s safe haven status has once again come to the fore,” a research note said.

“Looking out to next year, we expect strong demand from India, China and the Middle East to remain positive for gold.”

In industry news, Papua New Guinea gold miner Lihir Gold Ltd

cut its 2007 production forecasts by 7 percent to 700,000 ounces due to unplanned maintenance shutdowns, the company said in a statement on Thursday.

In other precious metals, platinum rose $4 to $1,477/1,480 an ounce, while palladium eased to $345/348 an ounce from $348/351 in late New York trade. Silver fell to $14.59/14.64 an ounce from $14.64/14.69.

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