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LONDON (Thomson Financial) - Gold prices stabilised near the 800 usd mark in early London trade after a stronger dollar and weaker oil prices yesterday pushed prices down.
'Bargain hunting has emerged overnight with gold edging back above 800 usd per ounce, and given the current volatility and our proximity to year-end we expect the yellow metal to remain in a choppy mood, straddling the 800 usd level,' said TheBullionDesk.com analyst James Moore. 'Aggressive selling was seen in gold yesterday in reaction to the data driven dollar gains.'
He added however that the continued fears stemming from the credit crunch were providing gold with good support. Gold is often used as a safe haven asset in times of economic turmoil.
At 10.36 am, spot gold was trading at 796.05 usd per ounce, down from 798.90 usd in late New York trade yesterday. Earlier it hit an intraday high of 803.35 usd per ounce, before easing on profit-taking.
The dollar has remained on a firm footing today, capping any moves upward in gold. Gold tends to move in the opposite direction to greenbacks, as it serves as an alternative investment to the most common source of cash reserves.
Oil prices are supporting gold today, up slightly after giving up over 2 usd yesterday. Investors often use gold as a hedge against inflation created by higher fuel costs.
Later today, market players will be focusing on data out of the US, which should drive the dollar's moves today. The Consumer Price Index, out at 1.30 pm GMT could warn of rising inflation, while Industrial Production for November, out at 2.15 pm could give further clues as to the extent of the economic slowdown in the world's largest economy.
'Key today, and looking ahead at January, will be the release of US CPI data as well as industrial production data,' said Standard Bank analyst Walter de Wet. 'Since US Fed policy decisions are a trade-off between these two numbers, the data should flag the Fed's intentions at its next meeting.'
Gold has risen some 30 pct so far this year, spurred on by a trinity of economic factors. A weak dollar, high oil prices and safe haven buying coming out of the subprime debacle have all boosted the metal, but increased physical buying in growing economies is also lending support.
Chinese gold used in jewellery jumped 24 pct to 221 metric tonnes in the first nine months from a year earlier. That compares with 515 tonnes in India, the biggest consumer, and 165 tonnes in the US, said analysts at Juno Mother Earth Asset Management.
'More economic development in China and a relatively higher savings ratio than that of India should in the long-term continue to drive gold demand in China,' said the hedge fund group. 'China is poised to become the world's second-largest jewellery market for gold this year, overtaking the US and coming in No 2 behind India.'
Among other precious metals, platinum was down at 1,462 usd from 1,466 usd while sister metal palladium dipped to 342 usd per ounce from 346.50 usd.
Silver, meanwhile, was trading at 14.01 usd per ounce against 14.10 usd. d.sheppard@thomson.com ds1/ds1/sal/ds1/jlc COPYRIGHT Copyright Thomson Financial News Limited 2007. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.
© 2007 AFX News
