Gold climbed to a fresh 16-year high in Asian trade on Monday after the dollar retorted record lows against the euro, making dollar-priced gold cheaper for holders of other currencies. Spot gold was at $433.50/434.25 an ounce after hitting $434, compared with 433.25/434.00 in New York on Friday. Dealers pegged immediate resistance at $435, a level last seen in August 1988.
"Concerns over the Bush administration's economic and foreign policy continue to weigh on the dollar and buoy precious metals," said N M Rothschild in a report. The dollar was at 1.2955 per euro, near late US levels.
It had slumped to 1.2973 per euro in Tokyo trading on persistent worries about gaping US fiscal deficits. Dealers said they were looking forward to a November 10 meeting of the US Federal Reserve Open Market Committee, which is widely expected to raise short-term interest rates by 25 basis points.
"Higher interest rates should favour the dollar. However, with sentiment strongly against the dollar, it will take more than a 25 point interest rate rise to alter the market's view," said Rothschild.
The market has been awash with concerns about the US twin deficits, which have been a key driver of dollar weakness.
The US budget deficit is about $427 billion, or 3.7 percent of gross domestic product, while the current account the broadest trade measures since it adds investment flows hit a record $166.18 billion shortfall in the second quarter.
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