Gold firmed in Wednesday European trading on a softer dollar, but a record US current account gap failed to push it out of its $440-445 an ounce trading range. Initial buying followed similar investment fund purchases late on Tuesday and helped the market continue its robust defence of $440.00. "We're in a situation where the market has got itself quite long...and the market is a little bit overbought here, so if anything the risk is to the downside," said David Holmes, vice-president at RBC Capital Markets.
"New lows on the dollar would help gold to try and tackle that $445/46 area."
At 1600 GMT spot gold was quoted at $443.10/443.80, up from New York's $440.25/441.00 late on Tuesday.
The dollar extended its losses after a report showed the US current account deficit widened to a record level in the fourth quarter of 2004. It rose to $187.8 billion, above calls for a $181.9 billion deficit.
The euro moved back up above $1.33 after the release and was last near the day's highs at $1.3437/40. A softer US currency increases gold's appeal because it makes the dollar-priced metal cheaper in other currencies.
Traders said gold was looking top-heavy after last week's gains pushed prices to a 2005 high of $446.70, but Holmes noted that euro-denominated gold was performing strongly, having hit a fresh high for the year the previous day.
"We have seen some natural gold interest, with gold in euros trading up to 431. That tells you there has been some underlying interest in gold," he said, adding this had probably flowed in via the general move into commodities, with oil and base metals also seeing more fund buying interest.
Silver was hardly moving, indicated at $7.39/7.42 from $7.36/7.39 late in New York.
Platinum notched up a six-week high at $882 - an area it has found hard to breach for some months now, having tested the level around five times since last summer.
Barclays Capital precious metals analyst Kamal Naqvi said platinum's performance had been remarkable over the past two days given downward moves in gold, silver and the South African rand.
"The strength of the rand has been a key support for platinum above $850 as it highlights the pressures on the expansion plans in South Africa," he wrote in a daily note.
"Traders report that some market participants have been caught short the market - either outright or on an assumption that the spread between platinum and palladium will narrow - and that short-covering could well see prices push higher still over the rest of the month."
Spot platinum was quoted just off its high at $881.00/885.00 from $873.00/878.00, while palladium firmed to $202.00/207.00 from $200/205.
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