Metals – Gold finds support from oil prices and weaker dollar
Gold found support from renewed concerns about inflation as oil prices continued to gain lost ground and as the dollar drifted lower in the wake of the Fed’s decision to keep interest rates unchanged.
“The combination of firmer oil/weaker dollar and the reiteration of inflation risk in the Fed’s statement have given gold a lift,” said James Moore at theBulliondesk.com.
At 11.38 am BST, spot gold was up 4.40 usd at 595.2 usd/oz. Crude oil prices were a touch lower after yesterday’s sharp gains but well bid above 61 usd/barrel.
Despite today’s gains, however, it will take a rally above 600 usd before it can be safely said that gold has overcome its recent downtrend, he added.
John Reade at UBS pointed out that while sentiment surrounding gold appears to have improved, there is little follow through buying seen as yet.
He noted that there is plenty of room for investors and funds to buy gold if they find a trigger, however.
Gold’s movements have been strongly correlated with oil recently due to the metal’s status as a hedge against inflation. As oil prices fell some 25 pct since mid-July gold lost some of this appeal, drifting lower from highs above 720 usd in May this year. But each time oil recovers, investors appear to be seeking out the metal again in order to take bets against inflation.
