Gold fluctuates in London on steadying dollar
Published 19/10/2010 | 12:34
Gold fluctuated in London as a pause in the dollar’s slump curbed demand for the metal bought by some investors as a means of protecting wealth.
The dollar was little changed against the euro after US Treasury Secretary Timothy Geithner said the nation will preserve confidence in a strong dollar.
The greenback slid to an eight-month low against the euro last week after Federal Reserve chief Ben Bernanke said additional monetary stimulus may be warranted. Gold, which usually moves inversely to the US currency, reached a record $1,387.35 an ounce on October 14.
A steadying dollar “is mildly negative for gold,” Peter Fertig, owner of Quantitative Commodity Research Ltd in Hainburg, Germany, said today by phone.
“There are a lot of worries” still, and data showing a slowing recovery “could make another point for quantitative easing,” he said.
Immediate-delivery bullion lost 10 cents to $1,368.35 an ounce at 9:38am in London. Prices swung between a gain of 0.2pc and a loss of 0.3pc.
Gold for December delivery was 0.2pc lower at $1,368.70 an ounce on the Comex in New York. Futures reached a record $1,388.10 on October 14.
Builders in the US probably began work on fewer homes in September, a sign the residential property market will be slow to recover from the recession, according to a Bloomberg survey of economists.
Gold, up 25pc this year, is heading for a 10th annual gain, the longest winning streak since at least 1920.
Bullion has outperformed global equities, Treasuries and most industrial metals, prompting record investment in gold-backed exchange- traded products.
The metal rallied as central banks and governments maintained low borrowing costs and spent trillions of dollars to stimulate economies.
Countries can’t devalue their currencies to achieve economic growth, and the US envisions the dollar will remain the global reserve currency, Geithner yesterday said in a panel discussion in Palo Alto, California.
“The dollar may remain a bit strong for the time being after US treasury secretary’s comments on the greenback, which will probably lead to a correction in gold,” said Hwang Il Doo, a senior trader at Korea Exchange Bank Futures Co in Seoul.
“Still, the dollar’s gain is seen limited on expectations for another round of quantitative easing.”
Gold will average $1,400 next year, up from a previous forecast of $1,295, UBS AG analysts including Edel Tully said in a report dated yesterday.
The metal will be supported by concerns about currency weakness and the likelihood of quantitative easing, the bank said.