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Gold slips on profit taking as dollar recovers
Gold fell 1 percent in Europe Tuesday as the U.S. dollar recovered some lost ground against the euro and investors took profits after the previous session's gains.
But with concerns remaining about the impact of the U.S. government's proposed US$700 billion bailout of the financial system, gold may be poised to trend higher, traders say.
Spot gold was at $889.90/891.90 an ounce by 08:56 GMT, down 1 percent from $900.20 an ounce at the nominal New York close on Monday.
The price of the precious metal at the Saigon Jewelry Joint Stock Company, Vietnam’s largest gold trader, rose VND350,000 to VND18.2 million a tael, or $917 per ounce. A tael is equal to 1.2 ounces.
In Hanoi, the gold price at gold trader Bao Tin Minh Chau gained a similar amount, rising to VND18.2 million per tael.
"Tuesday (Monday), we had a real up day in commodities in general, whether oil or gold," Afshin Nabavi, head of trading at MKS Finance in Geneva, said of the international gold price. "Today (Tuesday), there is a bit of profit taking."
"We still have to wait and see what the stock markets will do in Europe and the States," he said. "But buying on dips should be the name of the game."
The U.S. government's $700 billion rescue plan for the financial sector initially cheered the markets, but pressured equities and the dollar in later trade as investors worried about its budgetary implications and doubted it would prevent recession.
The weaker U.S. dollar boosted buying interest in gold and precious metals as an alternative investment. Volatility in the equity markets also prompted investors to switch out of stocks in favor of safer assets.
While investors are taking the opportunity to book profits, bullion is likely to turn higher if the dollar fails to recover.
"Despite its high volatility, gold's safe haven qualities are clearly attractive to investors, particularly in light of expected weakness of the U.S. dollar," Fairfax analyst John Meyer said.
Crude slides
Gold's losses mirrored those of crude oil, which slipped more than $2 a barrel on Tuesday after a record one-day rise in dollar terms in the previous session. Pricier crude tends to push gold priceshigher because the precious metal is often bought as a hedge against oil-led inflation. Rising oil prices also boost confidence in commodities as a whole.
Investment demand has been strong. The world's largest gold-backed exchange-traded fund, the SPDR Gold Trust GLD saw a 30.2-inflow on Monday that brought its gold holdings to a record 709.62 tons.
Buying for ETFs, which issues securities backed by physical bullion, represents a major source of demand for gold.
Thanhnien
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