Start trading forex from zero we give you 5 usd as start
Gold falls amid fragile sentiment, steadier dollar, weaker oil price
Wednesday, January 23, 2008
LONDON (Thomson Financial) - Gold fell amid fragile sentiment, battered by fears of a recession, equity market weakness and widespread uncertainty over the near-term economic outlook.
A steadier dollar, meanwhile, also knocked gold lower as the metal is often bought as an alternative asset to the US currency.
In the longer term, players reckon gold will be well supported by wider financial market-weakness as investors buy the metal as a safe store of value.
However, bouts of risk aversion and liquidation amid equity market volatility are likely to see the metal lower as investors raise cash to cope with losses.
Yesterday, bullion traded in a wide range from as low as 849.30 usd to a high of 894.45 usd. Some investors sold the metal off in a bid to raise cash to cope with widespread equity market losses after an emergency Fed rate cut while others bought gold as a safe store of value and as the dollar weakened.
The US central bank unexpectedly slashed a key interest rate by a bold three-quarters of a percentage point to 3.5 pct, which made for the first emergency cut since 9/11, responding to a global plunge in stock markets that heightened concerns about a recession.
The US central bank also signalled that further rate cuts were likely.
"The 75 point cut in the Fed Funds rate yesterday will most likely be followed with another cut next week and this remains supportive for the precious metals via the prospect of a) further USD weakness and b) through stoking medium term inflationary pressures," said JP Morgan analyst Michael Jansen.
At 1.29 pm, spot gold was trading at 880.75 usd per ounce, against 890 usd in late New York trade yesterday.
Today, London shares were lower and Wall St is expected to open lower.
GFT Global Markets' head of derivatives Martin Slaney said: "Overall, market confidence is low. Every rally we have seen recently has been sold into - a classic sign that we are entering into, if not already in, a bear market."
The dollar, meanwhile, was off lows seen yesterday, which limited a move up for gold. Oil, another of gold's main drivers, was lower, near 88 usd per barrel.
Gold moves in line with oil prices as the metal acts as an inflation hedge.
In other precious metals, silver was lower at 15.78 usd per ounce against 16.04 usd.
Platinum was down at 1,537 usd per ounce against 1,551 usd. Palladium was down at 362 usd per ounce from 367 usd.
