News Flash
Gold hits one-week high on fears over currencies
(Agencies)
Updated: 2010-02-12 01:29
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LONDON: Gold rose to a near one-week high at $1,090.85 an ounce on Thursday as investors bought the metal amid fears over the outlook for paper currencies, largely shrugging off the impact of a strengthening dollar.
The euro hit a session high versus the dollar after the EU president said a deal to help Greece had been reached. However, the single currency later declined as further details of the plan emerged.
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Simon Weeks, head of precious metals at the Bank of Nova Scotia, said gold was benefiting from fears over the outlook for paper currencies in general.
"People don't really want to be overexposed to dollars, they certainly don't want to be overexposed to euros and so on, and to that extent gold is acting as a currency in its own right," he said.
"So what you will find is even if the dollar strengthens, gold can strengthen as well. In non-US dollar currencies, it is actually performing really well."
Gold prices jumped 2 percent in euro terms to a near one-week high of 796.57 euros on Thursday.
European leaders struck a deal to provide financial aid to Greece earlier on Thursday, though details of the package were not expected to be finalized until EU finance ministers meet early next week.
The euro dropped to session lows against the dollar, US stocks opened in negative territory and European shares hit a session low in afternoon trading as the market sought more details of the aid package.
Investment eyed
With jewellery demand still relatively soft, the market is heavily dependent on investment demand, which is chiefly subject to currency moves, for direction.
"Investment demand is likely to be the wild card, and we think once the dollar starts weakening again, which is our view ultimately, then gold should resume its longer-term uptrend," said Tobias Merath, head of research at Credit Suisse.
"But for February and March, we think consolidation and some downside risks are due," he added. "The gold market could test the $1,000 mark and even drop below that, but we would consider that an entry point for longer-term investors."
On the physical markets, analysts reported good demand for gold in Asia ahead of the Chinese New Year holiday. Holdings of the world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, were steady on Wednesday.
On the supply side, South Africa's statistics office said gold mine output fell 8.8 percent in December in volume terms. The republic was the world's third-largest mine producer in 2008 with output of 233.3 tons.
But South Africa's fourth-biggest gold producer, DRDGOLD, reported a 4 percent rise in gold output for the quarter to December and a return to profit owing to lower operating costs.
Silver was at $15.41 an ounce against $15.18. Platinum was at $1,510 an ounce against $1,507, and palladium at $415.50 against $411.50.
Aquarius Platinum said in a conference call it sees attributable platinum group metals production at 445,000-450,000 ounces this year.
Constraints on platinum output from South Africa this year are a potential support to prices. South Africa is the source of four out of five ounces of mined platinum supply.
