Gold steadies below three-week highs in Europe

LONDON - Gold steadied on Monday just below a recent three-week high and analysts said the metal had potential to rise further in the near term on currency moves.

By (Reuters)

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Published: Mon 3 Sep 2007, 5:06 PM

Last updated: Sat 4 Apr 2015, 11:32 PM

Trading was likely to be muted on Monday as the US market is closed for the Labour Day holiday, but overall sentiment turned positive with the metal’s impressive gains last week.

‘Our expectation is that gold has some upside potential in the short and medium term. We still keep $700 an ounce as a target for the year but for the very short term, the dominant factor will remain the dollar,’ Frederic Panizzutti, analyst at MKS Finance, said.

‘It’s probably going to be a quiet day and this should enable gold to recover slowly towards $675. We see more potential on the upside at this stage than on the downside.’

The dollar fell marginally against the euro, making gold cheaper for holders of other currencies.

Spot gold was at $673.10/673.70 an ounce by 0959 GMT, against $673.00/673.60 late in New York on Friday, when it rallied to its highest in three weeks at $674.30.

Gold has rebounded more than 5 percent since falling to a seven-week low of $641.10 in mid-August, when investors sold gold and other metals for cash to cover margin calls on losses arising from a meltdown in the US subprime mortgage market.

Gold traditionally has been used by investors as protection against economic and political uncertainty. But in recent months it has behaved much like other financial assets because of the growing role of commodities in diversified portfolios.

Friday’s speeches by US President George W. Bush and the Federal Reserve Chairman Ben Bernanke calmed financial markets, while investors awaited the release of US economic data this week that may offer clues to the direction of precious metals.

Bush announced proposals intended to prevent homeowners from defaulting on risky mortgages. Bernanke said the Fed will take the necessary steps to shelter the economy from turmoil in financial markets but will not bail out speculators.

‘I don’t think the subprime problem has resolved ... but the US president and the Fed clearly relieved the market, which helped lift gold,’ said Tatsuo Kageyama, analyst at Kanetsu Asset Management in Tokyo.

‘We’ve seen volatility in financial markets, but investors are aware of the fact that gold has been solid during the time, so they are willing to buy gold on dips.’

The metal was supported last week by a strike at the giant gold mine owned by Lihir Gold Ltd. in Papua New Guinea. The company said the workers planned to return to work late on Tuesday.

In other metals, platinum rose to $1,269/1,272 an ounce from $1,262.50/1,269.50 in New York, when it climbed to its highest since mid-August at $1,274. Palladium was down $1 at $328/332, while silver rose to $12.10/12.14 an ounce from $12.02/12.06.

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