Gold under pressure as dollar rises, but supported

Gold under pressure as dollar rises, but supported
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First Published: Tue, Aug 14 2007. 01 27 PM IST
Updated: Tue, Aug 14 2007. 01 27 PM IST
Chikafumi Hodo / Reuters
Tokyo: Gold came under pressure on Tuesday, 14 August, as the dollar touched a one-month high against the euro, but the metal was bolstered as uncertainty in credit and equities markets continued to attract safe-haven demand.
Investors were reluctant to sell gold heavily on expectations that cash gold’s fall will be cushioned by physical buying from India and the Middle East when it falls below $660 an ounce, traders said.
“Gold will be vulnerable in the short term as price falls in credit and equity markets will affect prices, but in the long term gold will draw demand from investors,” said Hiroyuki Kikukawa, associate director at Nihon Unicom Inc. in Tokyo.
“Gold should gain safe-haven appeal as mid-term and long-term funds are still in the market with the balance of gold exchange-traded funds staying at high levels.”
Spot gold was at $669.20/669.70 an ounce as of 0646 GMT, down from $669.50/670.30 late in New York, but off Friday’s two-week low of $658.10 an ounce.
StreetTRACKS Gold Shares, the world’s largest gold-backed ETF by far, held 509.29 tonnes of gold, a shade lower that this month’s record high of 509.60 tonnes.
The key June 2008 gold contract on the Tokyo Commodity Exchange closed down 10 yen or 0.4% at 2,565 yen a gram. It had moved in a range of 2,558 to 2,569 yen.
Other TOCOM contracts ended down 9 to 12 yen.
Japanese investors locked in profits as the yen strengthened against the dollar after the key contract jumped by more than 1% the previous day.
Metals traders will continue to watch the fate of the financial and currency markets for direction in the precious metals market.
Gold is expected to find solid support on strong physical demand on price dips, but traders stayed nervous about taking large positions as long as jitters over US subprime mortgage problems stayed, they said.
“The near-term resistance for spot gold is $677 and as long as gold trades below this level, a bearish tone will dominate,” said Pradeep Unni, an analyst at Vision Commodity Services in Dubai.
“With stops at $677, rallies could be used as an opportunity to sell higher. A near-term direction is difficult to discern as long as gold trades between the key support and resistance levels,” said Unni, who pegs support at $658.
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First Published: Tue, Aug 14 2007. 01 27 PM IST
More Topics: Bullion | gold | euro | dollar | Money Matters |