Gold firms in Europe as the dollar turned lower against the euro, boosting interest in the precious metal as an alternative asset.
Lagging dollar boosts gold
Gold firmed in Europe yesterday as the dollar turned lower against the euro, boosting interest in the precious metal as an alternative asset and helping it buck the downward trend in commodities such as oil and copper. But prices remain vulnerable to further losses after declining 1.6 per cent last month, analysts said, with the dollar's upward trend expected to resume. Spot gold was bid at US$1,083.15 an ounce in early trading in New York, against $1,079.20 late on Friday. US gold futures for February delivery on the COMEX division of the New York Mercantile Exchange rose $1 to $1,084.00 an ounce.
"Gold has done relatively well, looking at what has been happening in other commodities," said David Thurtell, an analyst at Citigroup. "The dollar has been strong and gold was always going to struggle on the basis of that. "It is difficult to see the dollar weakening further. People have definitely been seeking out gold as a currency hedge and if that hedge is no longer needed, that is going to cap some of the demand for gold."
The dollar edged lower against the euro yesterday, but the euro continued to hover close to seven-month lows amid concerns over the fiscal health of some of the countries that use it. The dollar steadied but stayed close to a six-month high against a currency basket after Friday's GDP data, which was stronger than expected, suggested that the US is recovering faster than the euro zone and Japan. Weakness in the dollar boosts gold's appeal as an alternative and makes dollar-priced commodities cheaper for holders of other currencies.