Metals - Gold moves higher as dollar continues to languish

Metals - Gold moves higher as dollar continues to languish

	Published : Thu, 26 Apr 2007 11:08 By : Agencies Print this Story

LONDON (Thomson Financial) - Gold was higher in early trade as weakness in the US dollar continued and on strong physical demand from Asia, the precious metal's biggest market.

But gold's continued failure to break through resistance in the early 690s, despite positive news for the metal, has dampened sentiment, analysts said, and could keep prices in a holding pattern.

'Gold faced what should have been a tailor-made cocktail of events for higher prices -- surging oil prices, renewed US dollar weakness... and higher base metals prices,' said analyst James Steel at HSBC.

'This poor performance, relative to ostensibly bullish developments for gold, raises the question whether the gold rally is flagging,' he added.

At 10.27 am, spot gold was quoted at 686.30 usd per ounce, up from the 683.50 usd level seen in late New York trade yesterday.

The dollar continued to trade weaker after US new home sales data, released yesterday, came in below expectations, raising fresh concerns over the outlook for the US housing market.

The currency pulled back some losses this morning in Asian trade but remained near lows. Analysts said the failure of gold to move higher given the length of the dollar's decline was disappointing.

'While the rally (this morning) looked promising, the magnitude of the move in relation to the weakness experienced in the US dollar was rather dismal,' said analysts at Standard Bank.

Gold is a popular alternative investment to the dollar and typically moves in an inverse relationship to it.

The metal has gained in recent weeks on the US currency's continuing weakness, but has struggled to break resistance at the 692-693 usd level.

This has led to fears the metal may correct lower before another assault on the 700 usd resistance barrier is possible.

'Gold has repeatedly found it difficult to break past the 695 usd area of resistance,' said analyst Jon Nadler at Kitco Bullion Dealers.

'Thus, at this point in time, a visit to perhaps the 675 usd value zone is more of a possibility that the much-vaunted 'imminent' rise to 700 usd per ounce,' he added.

Among other precious metals, silver was steady at 13.76 usd against 13.75 usd in late New York trade yesterday.

Platinum rose to 1,309 usd from 1,303 usd last night. Palladium was at 374 usd, down from 377 usd yesterday.

jan.harvey@thomson.com

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