London: Gold fell from a record high hit earlier on Thursday as the dollar lifted from its lows, but the metal was still expected to seek higher ground due to prospects for central bank buying and further dollar weakness.
Spot gold hit a record high of $1,194.90 (Rs55,324) per ounce (28.35g), but had retreated to $1,184.95 an ounce versus its last quote of $1,190.30 in New York late on Wednesday.
“For long term, the rally looks intact,” said Commerzbank trader Michael Kempinski. “Even if we see a pullback there will be buying interest from the market to the dips, as long as we hold above $1,150 an ounce.”
Bullion has risen more than 37% this year, including a 13% rise in November alone on dollar weakness, expectations of further reserve diversification by central banks and fears of inflation next year.
Late on Wednesday, the International Monetary Fund (IMF) said it had sold 10 tonnes of gold to the Central Bank of Sri Lanka, a part of the 403.3 tonnes approved for sale by the fund’s executive board in September. The fund has already sold 202 tonnes to the central banks of India and Mauritius. The IMF sale of 200 tonnes of gold to India earlier this month was first reported by Mint.
“It appears that central banks are prepared to expand their gold reserves despite the current high gold price level, which in turn increasingly attracts private investors back to the market,” Eugen Weinberg, analyst at Commerzbank said in a research note.
The dollar recovered some poise after hitting a 14-year low against the yen as traders betting against the US currency cashed in on its recent slide. Against a basket of currencies, the US currency was up 0.46%.
US December gold futures also rose to a fresh high of $1,195.00 per ounce. Futures were last at $1,184.80 an ounce, compared with $1,187.00 on the Comex division of the New York Mercantile Exchange.
Gold has soared to new highs five times in the last ten trading sessions, and three times this week.
Traders said Dubai’s move to restructure its biggest corporate debtor, Dubai World, and delay some of the company’s $59 billion of liabilities had an indirect impact on gold as it moved the dollar.
Central Banks, particularly in Asia, increasingly looking to diversify their foreign exchange reserves after India’s purchase is a major factor buoying the yellow metal.
“Everybody is bullish on gold, and everybody is looking at the signal central banks are sending,” said Dick Poon, manager of precious metals at Heraeus in Hong Kong. “It’s not just India or China...everybody is looking at how much money they will invest in gold,” he said.
Any decision on whether India would buy more gold from the IMF would be taken by the Reserve Bank of India, Indian finance ministry official Anup Pujari, joint secretary for multilateral institutions, said on Thursday.
Poon said there was a lot of physical demand despite high prices, with Asian buyers seen in the market.
“Reserve diversification moves by non-G-7 central banks underscore investor detachment from US dollar assets and is clearly reflected in gold’s rally,” said Shuji Sugata, a manager at Mitsubishi Corp. Futures research team.