Gold Extends Gains as Investment Demand Returns
December 21st, 2009 Posted in In-Depth Analysis
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Gold prices edged higher today up $4 to $1,114 an ounce extending its gains from the previous session. The precious metal rose after a drop to the lowest price in more than a month encouraged some investors to buy the metal to hedge against the U.S dollar.
Last week Gold fell below a psychological support of $1,100 to a 6 week low $1,094.50 before gaining some ground. Prices dropped below $1,100 an ounce for the first time since Nov. 10 as the greenback touched a 3 month high against a basket of six major currencies. A firmer U.S dollar usually undermines Gold’s appeal as an alternative investment and makes the precious metal more expensive for holders of other currencies.
Gold’s appeal as a safe-haven play came into focus after news spread of a dispute between Iran and Iraq, lifting oil prices as well, which was also supportive for Gold as a hedge against inflation. Analysts said that the investment demand for Gold is likely to remain strong, as there is some buying interest in the market again.
However some market players see bullion prices stalling in the short-term due to weak physical buying and as further U.S dollar strength is expected. If the greenback continues to recover further, it might hit the Gold price quite sharply, back to the $1,000-$1,050 area.
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Tags: commodities market forecast, precious metal trading, trading gold
