GOLD prices rose yesterday , buoyed by interest from jewellery makers and investors seeking safety, but a stronger dollar against the euro and lower oil prices were expected to weigh on sentiment.
Spot gold was higher at $742,35-$744,35/oz by mid-afternoon from $732,40 in New York on Wednesday when it touched $762,30/oz, its highest in more than a week.
Data from the World Gold Council showing an 18% jump in demand for gold to 1334,4 tons and a 56% rise in investment demand to 382,1 tons in the third quarter had helped sentiment. “Investment demand for gold should hold up because there is strong risk aversion in the markets right now. That’s why we are optimistic gold will hold up,” Barbara Lambrecht of Commerzbank said.
Gold is used as a hedge against turmoil in financial markets — equity prices in Europe and the US are trading at their lowest levels in more than five years. It is also used as an alternative currency to the dollar when it is falling. The dollar hit a one-week high against the euro after the US Federal Reserve slashed growth forecasts for the world’s largest economy in next year , which analysts say could mean deep interest rate cuts. “Gold is following the dollar closely,” Lambrecht said. “There is a risk recession could dampen jewellery demand.” Reuters
