KH: Gold hits 8-week high as oil climbs, dollar slips
LONDON - Gold rose more than 1 percent to an eight-week high of $940.25 an ounce on Wednesday, supported by a slide in the dollar versus the euro and a jump in oil prices to a six-month peak.
Prices were higher for much of Wednesday but jumped after breaking through key technical resistance, identified by analysts who study charts of past price movements, just below $934 an ounce. Further resistance is seen at $951.
Spot gold was bid at $938.45 an ounce at 1416 GMT, against $924.65 an ounce late in New York on Tuesday. U.S. gold futures for June delivery on the COMEX division of the New York Mercantile Exchange rose $12.30 to $939.00 an ounce.
“It is definitely one of the driving forces that the U.S. dollar is weakening, particularly against the euro,” said Peter Fertig, an analyst at Quantitative Commodity Research.
“Also, firmer oil prices are usually regarded as a signal that inflation might pick up. However, that risk currently is rather small.”
Strength in crude oil prices can also boost interest in commodities as an asset class. Oil jumped above $61 a barrel on Wednesday to a new six-month high on bullish inventory data and a spate of refinery accidents in the United States.
A slide in the dollar also helped gold. The U.S. currency hit a four-month low versus the euro on Wednesday after U.S. Treasury Secretary Tim Geithner said the financial system was ”starting to heal.”
Recovery
While gold is now benefiting from dollar weakness, analysts say hopes for an economic recovery could limit its gains.
“I don’t think (gold’s rise) is sustainable as long as sentiment stays as upbeat as it is,” Commerzbank analyst Eugen Weinberg said.
“Before, gold was considered as an insurance against risk. People at the moment are not looking for insurance. Risk aversion is disappearing, and people are becoming more upbeat about the future.”
Wall Street opened higher on Wednesday, with investors optimistic the worst of the economic slowdown is abating.
Gold demand rose 38 percent in the first three months of 2009, the World Gold Council said earlier, as rising investment offset weaker jewellery and industrial usage.
WGC investment research manager Rozanna Wozniak told Reuters television she expects investment demand for gold to remain firm as investors seek a safe store of value for their money.
“I have some concerns over how long these green shoots (of recovery) will last,” she said. “I think overall the uncertainty is going to remain for a while yet.”
Platinum and palladium, mainly used by carmakers as components in autocatalysts, firmed, helped by rising gold prices and upbeat sentiment as traders, refiners and miners met for London’s Platinum Week.
Refiner Johnson Matthey said in a key report on Monday that strong Chinese jewellery demand was helping offset weakness in automotive buying.
Platinum was quoted at $1,153.50 an ounce against $1,137.50 late in New York on Tuesday, while palladium was at $233 against $231.
Prices of fellow platinum group metal rhodium rose $75 to $1,425 an ounce, and are up 7.5 percent so far this week. Silver was at $14.35 an ounce against $14.15.
