Gold 'likely' to remain vulnerable
Justin Brown
Mon, 12 Jun 2006
The spot price of gold on Monday afternoon was quoted marginally lower partly due to the stronger dollar as well as fund selling, analysts and traders said.
Last Friday gold fell to a seven-week low of $600.55/oz.
At 1.15pm, gold was quoted at $606.20/oz, down $0.65/oz from the metal's previous close. The euro was last quoted at $1.2600, down $0.0009 from late trade on Friday.
"Gold is lower on fund selling and the stronger US dollar. The $600/oz level is a key support level and if gold breaks below $600/oz then gold could go lower," a Johannesburg gold trader said.
The fall in the gold price was being partly driven by returning strength in the dollar, London-based Numis Securities analyst John Meyer wrote.
"However, it is possible that in the longer term, the US dollar will fall back due to the huge US trade deficit and corresponding surpluses in China, Japan and various oil producing countries. Many of these countries could look to turn to gold as a hedge against dollar weakness," he added.
Given the current mood in the gold market, it was extremely likely that gold would remain vulnerable to further dips in the short term, UK-based TheBullionDesk.com analyst James Moore wrote.
"Support is expected to be strong around $600/oz though, with technical support between $585/oz and $578/oz likely to hold, barring any extremely bearish news," he added.
"From here we suspect that the worst of the losses in precious metals have now been seen and that barring further financial market turmoil, gold et al may be close to forming a base here," London-based UBS analyst John Reade wrote.
The chart picture for gold remained negative and with none of the three bullish factors evident, strong physical demand, speculators rebuilding longs or renewed dollar weakness, Reade said he was not prepared to issue tactical buy recommendations.
Meyer said that a recovery in gold prices starting in August looked likely due to seasonal price movements. Gold prices tend to fall back in June and July each year as trading volumes fall, he added. |
