Gold Rally On Hold But Still Above $350
Mon January 13, 2003 06:04 AM ET
LONDON (Reuters) - Gold's price rally was put on hold in European trading Monday as lower oil prices, a slight recovery in the fragile dollar and late gains on Wall Street on Friday encouraged fund selling, traders and analysts said.
Spot gold was trading at $352.50/3.25 an ounce at 1036 GMT, lower than the $354.30/5.05 last quoted in New York Friday.
Gold raced to $356.50 last week, its highest level since March 1997 and 28 percent higher year-on-year, on the back of fears of a U.S.-Iraq war and tension with North Korea.
Despite the losses, further gains for the safe-haven metal could not be ruled out, analysts said.
"Short-term moves remain impossible to predict but with the dollar looking anemic and geopolitical tension continuing to build we continue to favor a move higher in the metal over the next few weeks," said John Reade, metals analyst at UBS Warburg.
The dollar pulled away from the previous session's three-year low versus the euro as the market looked ahead to key economic and corporate data. The euro was a touch lower at $1.0538, close to Friday's three-year high of $1.0585.
The scale and role of the ongoing U.S. and allied military build up against Iraq would also be key to gold price direction, analysts said.
"While the risk-reward profile of holding gold in place of other assets remains as favorable as it currently is, the broad gold price uptrend is likely to remain in place," said Merlin Marr-Johnson, analyst at HSBC Bank USA in London.
Bullion was set or "fixed" in the London morning session at $352.35 an ounce, down from the previous $353.00 fix.
Weaker oil prices weighed on gold in the session as inflationary pressures, and the need to seek bullion to protect against rising prices, appeared to lessen.
The Organization of Petroleum Exporting Countries (OPEC) has agreed to lift output by 1.5 million barrels a day (bpd) to compensate for falling output from cartel member Venezuela and because of fears of supply disruptions from Iraq in the event of any military action.
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