Tokyo gold futures firmed on Thursday as spot gold showed resilience after the recent sell-off and stayed near $650 an ounce, helped by the weakness in the dollar. A weaker dollar makes gold bullion, a currency alternative, more attractive for portfolio managers.
The dollars stood slightly below 116 yen, nearing on Monday's low of 115.16 yen its weakest since December. "When looking at the late slip in US stocks yesterday, confidence about the US economy has yet to be fixed and the dollar looks vulnerable to further selling," said Konami Gokon, research section manager at Okato Shoji Co Ltd.
"A bearish outlook for the dollar is basically a plus for gold bullion," he said. The benchmark gold contract on the Tokyo Commodity Exchange for February 2008 delivery finished the session at 2,449 yen a gram, up 16 yen or 0.7 percent from the previous close. Other contracts were up by 13 yen to 19 yen. Spot gold stood at $649.30/650.30 an ounce, compared with $650.25/650.75 late in New York on Wednesday. It had slid to a six-week low of $632.30 in Asia on Tuesday.
Investors are cautiously awaiting on Friday's US payrolls report for any weak figures that could further stoke expectations for the US Federal Reserve to cut interest rates later this year, potentially sparking more dollar selling.
While a stronger yen deflates yen-based futures contracts, a weaker dollar would provide chances for investors to buy cheaply if spot gold were on the rise towards $655 an ounce, analysts said. The February contract this week had fallen as low as 2,378 yen, the lowest for any benchmark since January 11. Following the recent market falls, TOCOM imposed extraordinary margins for every new position in gold, effective on Tuesday, for all contracts.
The measure, aimed at curbing excess volatility amid tumbling global markets and a rising yen, helped reduce open interest for a second consecutive session on Wednesday but are also making investors hesitant to build new positions, analysts said. TOCOM platinum futures followed gold futures to move higher. The benchmark for February 2008 delivery rose 36 yen a gram or 0.8 percent to 4,378 yen. Key TOCOM February silver futures also rose 3.3 yen per 10 grams or 0.7 percent to 483.5 yen.