Gold: 344.80
Silver: 4.82
USD: 95.95
Gold Gains as Euro Rallies Against Dollar
May 06, 2003 06:06:00 AM ET
>>Gold bulls were forecasting a test of $350, but gold would need to break through strong resistance at $345 to get there, Lee said.<<
LONDON (Reuters) - Gold moved higher on Tuesday as the euro (EUR-) rallied against the dollar ahead of the U.S. Federal Reserve's decision on interest rates, dealers said.
Spot gold (XAU-) was trading at $342.50/343.20 an ounce at 5:59 a.m. EDT, compared with New York's last quoted $341.95/2.45.
``We believe there is scope for the fund net long (position) to expand if current market conditions persist -- dollar weakness and macro concerns...the next major target for gold looks set to be $350,'' said Barclays Capital in London.
Gold's recent uptrend would remain intact or in line with the euro, unhurt by the announcement that the Canadian central bank had sold some its gold reserves, traders said.
``We continue to expect gold to trade higher in the coming months, if for no other reason than dollar weakness, although this remains very much the base case scenario -- further gains are possible should economic activity continue to disappoint,'' said John Reade, metals analyst at UBS Warburg.
Gold bulls were forecasting a test of $350, but gold would need to break through strong resistance at $345 to get there, Lee said.
The U.S. Federal Reserve, the central bank, is to hold a policy-setting meeting on Tuesday and the bank is expected to leave its key lending rates unchanged at a 40-year low, economists have said.
An announcement is expected at 2:15 p.m. EDT.
``I think that we'll still be in this $340-345 range after the Fed meeting,'' said Leon Lee, dealing officer at the Bank of China in Hong Kong.
``It looks like the Fed will not cut rates, the dollar will remain in its weak trend and the euro will test higher levels,'' Lee said.
The euro surged to fresh four year highs against the dollar, sterling and the yen, riding a wave of investor concerns about the health of the U.S. economy ahead of a U.S. Federal Reserve meeting.
Few in the market expect a cut this month but are wary rates may have to fall next month, which would depress paltry returns on U.S. fixed income assets even more.
Technically, a weaker dollar means the dollar price of an ounce of gold should rise, all other factors remaining unchanged.
``Longer term I still think gold is in for further gains as downward pressure on the dollar, despite continued U.S. Treasury belief in a strong dollar policy, geo-economic uncertainty and continued de-hedging by producers combine to push gold back toward $365,'' said James Moore, metals analyst at TheBullionDesk.com. Gold hit a 6-1/2 year high at $388.50 in early February in the run-up to the war in Iraq, touching a low of $318.75 on April 4, before regaining ground over the past month.
In other precious metals, silver gained ground in the wake of gold's run-up and was quoted at $4.79/4.81 an ounce, up two cents from New York's previous close.
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