LONDON, Nov 19: Gold burst above $400 an ounce on Wednesday for the first time since 1996, sucking in money from investors wanting protection as the dollar sank to record lows against the euro, while global security fears elevated the precious metal’s safe-haven value.
But the brief foray, which finally satisfied market obsession with the round number — peaking at a high of $400.25 in Asia and early European trading, could not be sustained.
Funds took profits as the euro came down against the greenback, confirming that the market’s jump was currency- and not gold-related, dealers said.
Dealers said that a pattern of profit-taking and rallies within fairly tight ranges would persist for the next few weeks.
“I think we’ll see this sort of action up until the US Thanksgiving holiday — with profit-taking on the highs unless we see any big moves in the dollar or the yen again,” one bullion dealer said.
“Given the strong relationship between gold and the euro-dollar so far this year it was appropriate that gold should achieve its peak shortly after (the euro) traded at an all-time high against the dollar,” said Ingrid Sternby of Barclays Capital.
Spot gold stood at $395.10/ 395.80 an ounce by 1544 GMT, up from New York’s last quoted level of $396.50/397.25.
A weaker dollar had made dollar-priced gold cheaper for holders of other currencies, giving a major boost to the yellow metal used for adornment and investment.
The greenback fell to an all-time low against the euro and to near three-year lows versus the yen after Washington said it would impose import quotas on Chinese textiles, raising fears protectionism would hurt the US economic recovery.
The euro was at $1.1918 after hitting an all-time peak at $1.1977.
Some analysts said the gold market would be choppy as traders and investors were likely to take profits and cut long positions held on New York’s COMEX market.
“We continue to believe that this is a sensible place for medium-term investors to take some profits at this level as speculative long gold positions remain at extreme highs and end-of-year position squaring on Comex and the OTC market could see gold end the year below the current levels,” said John Reade of UBS Investment Bank in a daily report.—Reuters