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Gold rises for 3rd day on firm euro, buoyant stocks

Gold rises for 3rd day on firm euro, buoyant stocks
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First Published: Wed, Oct 29 2008. 01 29 PM IST
Updated: Wed, Oct 29 2008. 01 29 PM IST
Singapore: Gold rose for a third straight day on Wednesday, earlier jumping more than 1% as the euro extended gains against the dollar and equities bounced, spurring speculative buying ahead of a key US interest rate decision.
Wall Street was bracing for the Federal Reserve to unveil a cut of between 50 and 75 basis points from the federal funds interest rate, which stands at 1.5%.
Gold traded at $747.90 an ounce, up $3.60 an ounce from New York’s notional close on Tuesday, when it also gained more than 1%. It hit an intraday high of $754.65, where selling emerged to trim early gains.
“It’s a bit slow but still there’s some physical demand from the investment side,” said Dick Poon, manager of precious metals at Heraeus Ltd in Hong Kong.
“Once the (global) market stabilises, I think there won’t be a problem for gold to rebound to $800,” said Poon, referring to a level last seen last week.
Gold tumbled to a 13-month low of $680.80 on Friday after losses in equities markets drove investors to cash in bullion to cover losses. It has lost more than 20% in value since spiking to a record high of $1,030.80 in March.
“It’s a little bit difficult to predict at this stage. The market is so very sensitive to the potential impact on growth of any Fed movement,” said Darren Heathcote of Investec Australia.
“You might think gold would benefit from safe haven (buying) but on the other hand, the damage it might do to the stock market could possibly mean we would get some gold selling for margin calls again,”
The euro rose to $1.2705 which in theory makes dollar-priced gold cheaper for holders of other currencies.
Asian stocks gave gold a shot in the arm, with the Nikkei rallying more than 7% on hopes the Bank of Japan might cut interest rates at a policy-setting meeting later this week.
“Failure to breach the key resistance at $755 is a kind of negative signal which may pave the way for gold to head lower to the recent support of $720 at theleast,” said analyst Pradeep Unni at Richcomm Global Services.
“Key supports are at $734, $720 and $709. Key Resistance is at $755, $768 and $786. A quick spike to $780-$790 is only possible if gold manages to hold above $755.”
Platinum erased a 6% gain made on Tuesday as worries about demand resurfaced after US Auto retailers swung to quarterly losses in the third quarter due to weakening US economy and hurricane-relateddamages.
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First Published: Wed, Oct 29 2008. 01 29 PM IST
More Topics: Market Crisis | Gold | Trading | Global | Money Matters |