Skip to main content

First time drop in gold price since July marks 3.3 percent decline

The dollar's strength led to a 3.3 percent drop this week in gold, roughly matching the metal's last significant weekly decline since July.

Gold stabled on Friday after its first weekly decline in nearly 3 months, with bullion investors keeping an eye on any statements from the G20 meeting.

Any currency reaction to the G20 meeting in South Korea this weekend could provide fresh momentum to the gold market.

Analysts, however, said it is unlikely for members to reach a deal on a U.S.-led initiative for a commitment from emerging economies to allow their currencies to rise.

"I don't think there was an expectation that they will come up with a grand solution because everybody does have a different interest," said Axel Merk, portfolio manager of Palo Alto, California-based Merk Mutual Funds.

"It's just the very beginning of a currency war. It's going to take a while to brew over. I have no doubt gold will be the beneficiary in the long run," he said.

Gold was more than 3 percent lower this week, after China's surprised rate hike sent the dollar up 0.7 percent since Monday. The inverse correlation between gold and the dollar has been the closest in a month, Reuters data showed.

Spot gold was up slightly at $1,323.81 an ounce at 1:44 p.m. EDT, having earlier fallen to a 2-1/2 low at $1,315.09. U.S. gold futures for December delivery fell $1.30 an ounce to $1,324.30.

The dollar was on track to snap a five-week losing streak against major currencies as traders took profits ahead of possible news from the G20 meeting and the euro repeatedly ran into technical resistance above $1.40.

Standard Chartered analyst Daniel Smith said the dollar has been a very important driver and gold could see more weakness in the short term.

"I think the price has run up too fast and we're just going through a period of consolidation now," Smith said.

Spot prices rallied sharply to a record $1,387.10 an ounce late last week but have struggled to maintain traction as the dollar rebounded from lows amid fears expected U.S. monetary easing had been too heavily priced into the market.

Although significant action is not widely anticipated, traders are awaiting a forthcoming Fed policy meeting that could result in further quantitative easing.

Good physical demand from traditional bullion-buying centers such as India is strengthening as prices descend.
  
Dealers in India reported they were continuing to stock up for forthcoming festivals, including the Hindu festival of Diwali, a major gold-buying events, as prices corrected this week.

Comments

Popular posts from this blog

India film industry contributes $6.2 billion in year

India's film and television industry contributes an immense $6.2 billion (Rs 28,305 crores) to the Indian economy, according to a new report released by PricewaterhouseCoopers. The report, titled Economic Contribution of the Indian Film and Television Industry, also finds that the sector has a total gross output of $20.4 billion (Rs 92,645 crores) and contributes more to the GDP of India than the advertising industry. "This report demonstrates the importance of the film and television sector to the overall growth and vitality of the Indian economy. Indians should be proud of the staggering growth that the film and television industry has achieved," said Motion Picture Association of America (MPAA) chairman Dan Glickman, who launched the report in New Delhi at the Asia Society Conference. "The film and television industry in India is one of the world's largest markets in terms of number of consumers and offers significant growth potential. Over the past fe...

BGB from BDR

No more BDR! Bangladesh Rifles (BDR) has officially been named after Border Guard of Bangladesh (BGB) today, January 23, 2011.  The renaming, though came into effect after the president signed the bill passed through parliament over a month ago, came on Sunday after prime minister Sheikh Hasina hoisted the BGB flag at its Peelkhana headquarters.  The flag has also been changed a little bit.  Bangladesh's 'first line of defence' went through a few changes, including its name and uniform, with a new law stipulating death for mutiny, apparently to absolve it of the bloody mutiny of Feb 25-26, 2009.   Parliament passed the bill, which was subsequently endorsed by the president on Dec 20 last year , bringing the changes in BDR to rid it of the stigma that would invariably be attached to its name.  But Maj Gen Mohammad Rafiqul Islam at a function on Jan 1 used his old designation as head of BDR since, according to him, 'formalities' to call him the BGB direct...