LONDON, Nov 13: Gold bounced back to trade above $800 an ounce on Tuesday after falling overnight to a one-week low, as bargain-hunters resurfaced and a weaker dollar supported the market, analysts said.
But the metal remained vulnerable to further corrections because of a decline in oil prices and profit-taking from last week’s rally that saw the metal hitting a 28-year high of $845.40 and hovering near its record peak of $850.
Gold hit a low of $790.80, its lowest since Nov. 2, before rising to $808.70. It was at $804.35/805.05 an ounce by 1013 GMT, against $803.10/803.90 late in New York on Monday.
Given that speculative positions have reached yet another record high, the market is likely to see a liquidation. It could correct a bit further lower to $786, said Suki Cooper, analyst at Barclays Capital.
But we still maintain our positive outlook on the oil market, the dollar will remain quite weak and there are inflationary concerns. $850 is still obtainable as the overriding drivers for gold remain very positive, she said.
Gold posted its biggest percentage loss since October 2006 on Monday, after investors liquidated positions on sliding oil and a wave of risk aversion, which hit equity and foreign exchange markets. Oil fell more than $1 a barrel after the International Energy Agency cut its forecast for world oil demand growth, saying that the recent surge in oil had hurt consumption.
Gold is generally seen as a hedge against oil-led inflation and often moves in the opposite direction of the dollar. The dollar fell to move closer to a recent record low against the euro.
There seems to be bargain hunters at below $800. Some dealers were caught short at around $800 and pushed up the market again said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.
In other bullion markets, the key gold futures contract for October 2008 delivery on the Tokyo Commodity Exchange fell to its lowest in almost 3 weeks at 2,815 yen per gram before ending at 2,887 yen, down 36 yen from Monday’s close.
The most-active December gold contract on the COMEX division of the New York Mercantile Exchange fell $2.4 an ounce to $805.2 on electronic trade.
Silver edged up to $14.63/14.68 an ounce from $14.55/14.60,while palladium was flat at $364/368.—Reuters
