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Gold rises on weak dollar { June 2007 } Original Source Link: (May no longer be active)
http://www.forbes.com/markets/feeds/afx/2007/07/16/afx3917045.htmlhttp://www.forbes.com/markets/feeds/afx/2007/07/16/afx3917045.html
AFX News Limited
Metals - Gold continues at high levels on weak dollar, high oil prices
07.16.07, 11:12 AM ET
LONDON (Thomson Financial) - Gold continued at high levels on the back of a weak dollar and oil prices approaching all-time highs.
Gold tends to rise in line with oil prices, and counter to the dollar, acting as an inflationary hedge against rising energy costs, and as an alternative investment to the US currency.
'It's still very much the weaker dollar that is the main driver,' said BullionDesk.com analyst, James Moore. 'Firm oil prices are definitely lending support.'
At 2:50 pm, spot gold was trading at 666.50 usd an ounce, compared with 666.20 usd in late New York trades on Friday.
Gold hit a five-week high of 669.05 usd last Thursday after the dollar slipped to its lowest ever level against the euro. Oil prices are within a dollar of their record highs, with benchmark Brent crude hovering around the 78 usd mark.
'Gold prices (are) still chasing oil due to its correlation with global inflation,' said Numis analyst John Meyer.
Gold's gains have been limited by a lack of interest from jewellers at higher prices, and profit taking by investors.
With the dollar now close to record lows against the euro, some analysts recommend market players watch gold's performance in relation to other currencies.
'Everyone's going to blame the strength of gold on the weakness of the dollar,' said Dennis Gartman, editor of The Gartman Letter trading note. 'But good bull markets rise in all currencies.'
Gartman added if the precious metal should push through 500 euros an ounce over the coming weeks it could be an indicator of a prolonged rise in the gold market.
Gold is currently trading around 482 euros an ounce.
Looking to the week ahead, gold traders will be waiting for Federal Reserve Chairman Ben Bernanke's testimony to the US Congress on Wednesday and Thursday, and the release of the latest Fed meeting minutes on Thursday, to help gauge the outlook for the US economy.
'The market will be interested to note if Dr. Bernanke is more concerned about inflation than he might be about the economy itself or the housing market in particular,' said Gartman.
'A hint of the former rather than of the latter shall be sufficient to push the dollar higher.'
Some analysts predict that gold will climb higher in the second half of the year based on historical trends.
'We are soon to enter gold and silver's seasonally strong months,' said analysts at Gold Investments.
'In the last 35 years, June and July are traditionally weaker months and August, September, November and December the stronger months when gold has performed best.
'If this trend continues, as it is likely to do so, we are likely to challenge May 2006's highs above 700 usd and given the length of the consolidation and increasingly strong fundamentals there is a chance that we could rally towards the next big psychological level of 800 usd,' they added.
Among other precious metals, platinum edged higher in early trade on news that Lonmin (other-otc: LOMNY.PK - news - people ), the world's third-biggest platinum company, is to defer 70,000- 90,000 ounces of sales until September, due to refining bottlenecks.
The Lonmin shortfall is expected to dent platinum's predicted surplus for the year, tightening global supply.
'In a very tight supply and demand situation as exists in platinum this will be more than supportive,' said analysts at Gold Investments.
Platinum hit an intraday high of 1,315 usd before easing back to Friday's close of 1,311 usd per ounce.
Its sister metal palladium was down slightly at 366 versus 367 usd, while silver slipped to 12.97 usd per ounce against 13.01 usd.
d.sheppard@thomson.com
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