×
Home Companies Industry Politics Money Opinion LoungeMultimedia Science Education Sports TechnologyConsumerSpecialsMint on Sunday
×

Gold drops as dollar strengthens, oil declines

Gold drops as dollar strengthens, oil declines
Comment E-mail Print Share
First Published: Mon, Jul 14 2008. 11 14 PM IST
Updated: Mon, Jul 14 2008. 11 14 PM IST
Oslo, Norway: Gold fell for the first time in four days in London, as a stronger dollar and weaker energy prices reduced the appeal of commodities as a hedge against inflation.
Gold has had a correlation of 0.69 to the euro-dollar exchange rate this year, up from 0.58 last year, Bloomberg data show. A figure of 1 would mean the two move in lockstep. The dollar rose for the first time in four days against the euro after US treasury secretary Henry Paulson asked for the authority to buy stakes in Freddie Mac and Fannie Mae.
“What policymakers like the treasury and the Federal Reserve don’t want to see is a sharp and disorderly drop in the dollar,” said Mario Innecco, a futures broker at MF Global Ltd in London, adding that gold also fell because “oil is down.”
Gold for immediate delivery dropped as much as 1% to $954.34, and traded at $963.71 by 2:21 p.m. in London. Futures for August delivery gained $3.90, or 0.4%, to $964.50 on the Comex division of the New York Mercantile Exchange.
Bullion gained 3.3% last week, and has advanced 16% so far this year.
Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by gold, advanced to a record 705.9 metric tonnes on 10 July. Holdings in the fund rose from 659.91 tonnes, according to data posted on the company’s Web site on 11 July.
“The moves in ETF holdings is evidence that investors have become much more worried about systemic risk” in financial markets and are seeking a haven in gold, UBS AG said in a note to investors on Monday. The bank raised its one-month forecast to $1,000 an ounce, from $900, and its three-month estimate to $1,050, from $850.
Gold may climb for a fifth straight week on speculation slumping equities will spark demand for a haven, according to a Bloomberg survey. Eighteen of 25 traders, investors and analysts from Mumbai to Chicago on 10 and 11 July advised buying gold. Five said to sell, and two were neutral.
A majority of analysts surveyed July 3 and July 4 anticipated gold’s gain last week. The survey has forecast prices accurately in 134 of 219 weeks, or 61% of the time.
Comment E-mail Print Share
First Published: Mon, Jul 14 2008. 11 14 PM IST
More Topics: Gold | Oil | US | Dollar | Euro |