LONDON (Thomson Financial) - Gold held near a one-month high hit yesterday amid thin trading as high oil prices sparked inflation jitters and as the dollar weakened against the euro.
The precious metal moves in line with high oil prices as it is often bought as a hedge against energy-led inflation, but trades in the opposite direction to the greenback as it is seen as an alternative asset.
Yesterday, gold hit its highest value since November 27 of 825.95 usd per ounce, helped in part by weak US housing data. The dollar weakened against the euro following data yesterday showing a record deterioration in US home prices. The S&P/Case-Shiller's 10-city composite home price index was down 6.7 pct from from October of 2006, a record decline. The previous record was a 6.3 pct drop recorded in April of 1991, just after the 1990-91 recession officially ended.
A weaker dollar makes gold cheaper for those trading in other currency, and so lifts the price of the metal.
Meanwhile, high oil prices, which are close to 96 usd per barrel, helped underpin the metal.
'Some profit taking has been seen overnight and in early Europe however with the dollar still under pressure the (precious) metals have not fallen far, and could easily bounce higher as trading conditions remain thin with people taking extended Christmas holidays,' said TheBullionDesk.Com analyst James Moore. 'With interest rate speculation keeping the dollar under pressure and with investors still increasing their holdings...we remain bullish towards gold and continue to expect the metal to eclipse its 850 usd all-time high in early 2008,' he added.
Gold hit a record peak of 850 usd an ounce in January 1980.
At 9.22 am, spot gold was trading at 824.05 usd per ounce against 825.50 usd in late New York trades yesterday.
In other precious metals, platinum was lower at 1,527 usd having closed at a record high of 1,541 an ounce yesterday.
The move higher yesterday appeared attributable to funds looking to increase long positions in US trading, as physical players were largely absent for seasonal holidays, said an analyst at Standard Bank. 'The overall fundamentals remain relatively bullish for platinum and there may be further gains ahead in the short-term with fundamental supply concerns hanging over the market, though again, there is vulnerability in the short-term for profit taking as we head to the year's close.'
Elsewhere palladium dipped to 360 usd from 361 usd per ounce, while silver rose to 14.70 usd from 14.69 usd. anealla.safdar@thomson.com as/ajb 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
