Wednesday, 21 Oct 2009

Weakened Dollar Puts Gold back on Top

Gold finished slightly higher Tuesday after a volatile session, as the U.S dollar hovered near 14-month lows. However, the precious metal still finished well off morning highs as weak U.S. housing data and mixed earnings eventually led investors to sell stocks to buy Dollars, reducing Gold's appeal as a hedge against a weaker currency and rising prices.

Gold prices have been on the rise in the past eight weeks. Last week, the benchmark contract gained 0.3% and briefly topped $1,070 an ounce, a new intraday high. Analysts believe that any dip in Gold prices will be short-lived. But the basic line remains the same for gold. Gold is often seen as a hedge against a weakening U.S dollar. A weaker greenback also makes Gold and other commodities cheaper for holders of other currencies Thefore the Gold is likely to keep gaining support from the USD being on the defensive for the time being.