US: Gold prices remained stable as dollar slides to one-month low
Gold prices remained stable as dollar slides to one-month low
The Gold advanced for a third- straight day in London as concern about Europe’s debt crisis, signs that the U.S. economy is losing its pace and a weakening dollar spurred demand for the metal as an alternative investment.
According to the reports showed last week, the U.S. payrolls grew at the slowest pace in eight months in May and manufacturing expanded at its slowest pace in more than a year. The European Union needs to reach an accord on Greece’s debts before finance ministers meet on June 20, EU Economic and Monetary Affairs Commissioner Olli Rehn announced yesterday. The dollar slipped to a one-month low versus six currencies. Gold typically moves counter to the greenback.
Gold prices remained stable in Europe on Tuesday as the dollar retreated to its one-month low versus a basket of currencies, hurt by warnings from a Chinese foreign exchange official of the risks of excessive dollar holdings.
Barclays Capital analysts announced on Tuesday that the long term price of gold could come under pressure from a rallying dollar as the risk from the sovereign debt crisis subsides.
The relationship between the US dollar and the euro to gold tended towards the negative side, suggesting the gold price was being supported by investors diversifying their portfolios to include gold as a risk trade.
For August delivery, gold was adding $3.40 to $1,550.60 at the New York Mercantile Exchange. The gold price has traded as high as $1,550.70 and as low as $1,543.20 while the spot gold price was up $4.70, according to Kitco’s gold index.
Another possible conclusion was that the US dollar still retained an advantage over the euro as a store of value despite the US fiscal concerns.
If the European sovereign debt crisis were to stabilise, as BarCap analysts expected it to, the relationship between the gold price and the two major currencies would change as well, they said, with the euro becoming more positively correlated with gold and the US dollar more negatively correlated.
