RTRS: Gold slips towards $1,135/oz as dollar firms
By Jan Harvey
LONDON (Reuters) - Gold slipped toward $1,135 an ounce in Europe on Friday as the dollar firmed, dampening the momentum which has lifted prices more than 9 percent this month.
Spot gold touched a low of $1,135.60 an ounce and was bid at $1,137.15 an ounce at 7:16 EST (1216 GMT), against $1,143.50 late in New York on Thursday.
U.S. gold futures for December delivery on the COMEX division of the New York Mercantile Exchange fell $4.40 to $1,137.50 an ounce.
But the metal could be poised to break out to new highs if the dollar's recovery falters, analysts said.
"At the moment it looks like gold is awaiting the next big clue for a further push beyond $1,154, as current fundamentals seem to have been totally factored into the price," said Pradeep Unni, senior analyst at Richcomm Global Services.
"The dollar index is hovering above the 75 zone and that strength is keeping the lid on gains," he added. "(But) the current uptrend is pretty much intact."
The dollar index firmed 0.64 percent on Friday as investors shed riskier investments. European shares fell for a fourth session, and U.S. stock futures declined.
Strength in the U.S. unit weighs on gold, as it cuts its appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.
However, gold has enough support from investment interest and technical momentum to resist this pressure, analysts said.
"Normally gold has an inverse relationship with the dollar," said JP Morgan in a note. "However, when fundamentals make gold more attractive, it overcomes its normal relationship."
Investor interest in gold was boosted early this month by a spate of central bank gold purchases, including India's acquisition of 200 tons of bullion from the IMF.
The upward move resulting from this pushed gold through key technical resistance levels, fuelling strong momentum buying which took gold to a record $1,152.75 an ounce on Wednesday.
INFLATION HEDGE
Analysts said gold was likely to take support from interest in the metal as a hedge against inflation, which some fear will hit the markets longer term as a result of quantitative easing.
Andrew Cole, manager of the Baring Multi Asset Fund, told Reuters on Thursday that gold could hit new highs this year and next as investors look for an inflation hedge. Continued...
