Gold dips but still hovers near US$1 000

TOKYO – Gold dipped a touch yesterday but stayed near the psychological level of US$1 000 an ounce on buying linked to a weaker US dollar and fears about inflation, which could still spur another rally.

The physical market in Asia saw selling from holders, with demand from India also slowing to a trickle as jewellers sought to buy on dips during the festive season in the world’s largest consumer. Spot gold stood at US$993,70 per ounce, down 0,2 per cent from New York notional close of US$993,40, having rallied to US$997,20 on Thursday – the highest level since February, when it topped US$1 000.’The volumes last week that saw it rise were relatively low … and you might have thought it would be a fragile rise to these lofty peaks,’ said Darren Heathcote, head of trading at Investec Australia.’The market considers that we could be looking at more inflation,’ said Heathcote, adding that there was a chance gold could climb above the US$1 000 level if it manages to weather a round of profit-taking.Gold is seen as a hedge against inflation, which erodes the value of paper assets. The metal has gained on anticipation of declines in stock markets and inflation fears, with central banks pumping money into their economies to help fight the global recession.’The price is close to US$1 000, so you can see there’s not much activity. There’s a tug-of-war. Some funds are buying and some investors are taking profit at the high,’ said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.’If it can’t break US$1 000 in the next few days, the market will be a bit tired, and maybe some profit taking will set in. Of course, you can say everybody is bullish,’ he said.Traders said it was a quiet day with New York commodity markets closed yesterday due to the US Labour Day holiday but a weaker dollar supported prices.The dollar and yen lost ground yesterday, while the euro rose and the Australian dollar hit its strongest level in a year as shares gained following a G20 pledge to keep economic supports in place.In a sign of possible falling investor interest, the world’s largest gold-backed exchange-traded fund, the SPDR Gold Trust, said its holdings fell 0,38 tons to 1 077,63 tons on Friday.Many market participants thought gold would be hit by near-term profit-taking after last week’s rally, with gold futures prices climbing by more than four per cent during the week to hit a peak of US$999,50 on Thursday.That was the highest level since February, the last time it topped US$1 000.- Nampa-Reuters