Weaker dollar only hope for flagging gold price: UBS.
Gold will struggle to break out of its long-term decline unless the US dollar weakens against the currencies of major gold consuming countries, senior analyst with UBS Warburg, John Reade said Tuesday.
Speaking to delegates at the 24th Financial Times World Gold Conference in Rome, Reade said that UBS believed the US$ would weaken against the major currencies in 2001, therefore giving a boost to gold prices. A strong dollar usually sees demand patterns fall, as the price of gold is pushed up in major consuming countries like India, Italy and China. Reade added; "Should the relationship that we have identified hold true, a sustained rally in the US$ gold price will require a strengthening in the average gold consumer currencies, and perhaps the average gold producer currencies."
Meanwhile, an expected announcement Tuesday of further interest rates by the US Federal Reserve, may see the dollar weaker, depending on the size of the cut, analysts said. Market opinion remained divided on whether the cut will be 50 or 75 basis points. Some market watchers believe that last week's volatility in the global equities markets may have persuaded the Fed to cut rates by 75 points.
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