A rising dollar against the euro did little to dampen enthusiasm for gold across Asia on Friday, providing further evidence that bullion was decoupling from currency markets. A weeklong rally in gold accelerated on Thursday, sweeping the precious metal to its highest price since late April. Spot gold was quoted at $436.50/$437.00 an ounce down about 0.50 on the day but still above the late US level of $435.80.
On Thursday, gold saw its biggest jump since August last year. "The correlation between gold and the currencies is losing importance while the fundamentals of the gold market are turning positive," Australia & New Zealand Bank commodities analyst Daniel Hyenas said.
Because gold is priced in US dollars and bought in sold in any number of currencies, forex arbitrage opportunities have long been a part of the gold trading.
But the correlation between the dollar and gold deviating little over the last three or four years has been the dominant currency factor holding sway over gold.
The euro was around $1.2105, barely changed from late US trade where it slipped as low as $1.2056, not far from a nine-month low.
Gold mining majors such as Newmont Mining and Anglo Gold Aslant have long maintained that the gold price moves 80 percent of time in relation to foreign exchange and only 20 percent on market fundamentals.
That connection has become less apparent as European economic growth and unity comes into question and traders say market fundamental point to more demand and less supply.
Declining output in the world's top three producers, South Africa, the United States and Australia, and a willingness among central banks to hold on to their reserves point to a growing gap between supply and demand, analysts said.
Traders cited big investments by hedge funds and speculators betting gold would outperform the euro. "This decoupling means that there will be a focus on the fundamentals of the gold market and not just track the relationship between the dollar and the euro," Commonwealth Bank of Australia commodities specialist David Thurtell said.
Silver stood at $7.36/38 an ounce from $7.32/35 in New York. Platinum was quoted at $886.00/891.00 an ounce, compared with $884/$889 in New York. Sister metal palladium was at $188/$193 an ounce from $186/$190.