Gold eases on Profit taking.......Metals - Gold eases on profit taking after recent gains but outlook still upbeat
Mon, Jul 23 2007, 13:35 GMT
https://www.afxnews.com
LONDON (Thomson Financial) - Gold eased slightly on profit taking and as the dollar recovered some lost ground against major currencies, but most analysts said prices were well supported on fund buying and as long term dollar weakness is likely to add to the precious metal's alternative asset appeal.
Though the greenback recovered slightly from earlier intraday lows the US currency remains weak against major currencies. US currency weakness makes dollar-denominated gold cheaper for those trading in foreign currency.
"Sentiment remains positive. However, without a major economic data release, a consolidation after the strong rise last week cannot be ruled out," said Dresdner Kleinwort analyst Peter Fertig.
At 2.11 pm, spot gold was trading at 683.20 usd an ounce, from 684.00 usd in late New York trade Friday. On Friday, prices hit an intraday high of 686.15 usd, the highest price reached since early May.
Gold gained more than 2 pct last week from the highs.
Players will continue to track the dollar's movements but with little key economic data out this week, US equity markets and further signs of a fall-out in the subprime lending market will be eyed.
"The key to gold prices in the near term, in our view, will be how the financial markets continue to cope with financial risk, in light of subprime market losses," said HSBC analyst James Steel.
With gold targeting higher levels, some analysts have once again called for the precious metal to strike 700 usd, mainly on dollar weakness.
However, gold has come close to that level twice already this year, once in February when it hit a month high of 688.50 usd and then in April when it rose to a year high of 693 usd.
Because the dollar has been declining relentlessly it's pushed gold up and triggered technical buying, said SocGen analyst Steven Briggs. He added, however, "if the dollar starts to stabilise or strengthen then gold is going to really struggle".
Briggs said SocGen's currency team had a "slightly bullish view on the dollar which is why we're bearish of gold".
Elsewhere, analysts also noted fresh interest in gold Exchange Traded Funds (ETF) underpinned the metal.
"As well, there is evidence of increased investor interest in gold. Gold holdings at several ETFs have increased over the past week," said analysts at the Commonwealth Bank of Australia.
ETFs trade commodity futures and back up every ounce of stock bought on paper with actual physical stock. ETFs therefore squeeze the market as less stock becomes available to the market.
By buying shares in an ETF, investors gain exposure to commodities without having to trade futures or commit to physical delivery.
In other precious metals, silver was flat at 13.32 usd per ounce, platinum was down at 1,325 usd from 1,332 usd, while palladium was lower at 366 usd from 370 usd at the end of last week.
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