Gold dips as dollar firms

28 Jan, 2005

Gold softened in Europe on Thursday as strong US data helped the dollar to recoup earlier losses, denting gold's investment allure, traders said. But 32 analysts polled by Reuters were upbeat on the metal's outlook for 2005 - expecting a fourth successive year of gains - with prices seen surpassing December's 16-1/2 year peak of $456.75 at some point.
By 1546 GMT spot gold was quoted at $424.85/425.60 a troy ounce, compared with Wednesday's late trade in New York at $426.50/427.00. The euro was last at $1.3051.
"We're stuck in a range of about $421-428," one dealer said. "If we break through $428 then there could be pretty good volume on the upside," he added.
A solid rise in US durable goods orders in December and a less-than-expected increase in US jobless claims last week helped the dollar to strengthen across the board.
But with the Group of Seven meeting looming next week, as well as other major events like the Iraqi elections, a Federal Reserve decision on interest rates and US employment data, analysts said the currency market lacked conviction and firm direction.
Producer hedging issues were highlighted by Anglogold Ashanti posting a seven percent fall in adjusted fourth-quarter operating profit as costs climbed and hedging dampened its exposure to a higher gold price.
But the world's second-biggest gold producer said it had slashed 2.2 million ounces from its hedging programme because it was bullish on gold prices.
Broker HSBC noted that the decision to reduce the hedge position reflected the company's view that gold would continue to trade in its current range or higher.
Other established hedgers have cut positions, notably Barrick Gold and Placer Dome.
"In the past five years the unwinding of hedge positions has added over 1,300 tonnes to demand, and with an outstanding hedge position still of almost 1,800 tonnes, unwinding of hedge positions is likely to be a continued source of demand for some time," HSBC added.
In other precious metals, silver dropped back in line with gold to $6.71/6.74 from New York's $6.77/6.80.
Platinum was at $866.00/870.00, against $865.00/870.00, while palladium was flat at $187.00/191.00.

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