Gold forced lower as investors seek safe haven in stronger dollar

Gold forced lower as investors seek safe haven in stronger dollar

London (Platts)--18Jul2006

Gold was indicated lower in London morning trade Tuesday following on
from volatile overnight and in early Asian trade. Spot bullion was bid at
$648.50-649.10/oz at 0917 GMT Tuesday morning, down $1.80 from the late spot
price in New York and $4.30 lower that the afternoon fix in London on Monday.
Standard Bank London said in a morning website report that news out of the
Middle East on Monday that Israel might be wrapping up their military actions
in Lebanon by the end of this week "caused some large scale long liquidation
as nervous investors exited positions built with 'flight-to-safety' in mind."
The bank noted further that selling continued after the New York close,
with gold dropping lower to $642.50/oz offered but bounced back on bargain and
physical buying. "The volatile trade extended to early Asian trading on
Tuesday welcoming the return of Japanese participants from their holiday, as
gold traded widely between $645/oz and $653/oz in often choppy conditions,"
said Standard. It said although gold was likely to hold in consolidation
around the $650/oz level following its recent rally to multi-week highs of
$676/oz, the highly combustible situation in the Middle East should still
prove supportive. "Support is expected to hold from $642/oz to $636/oz, with
overhead resistance in the $670's," said Standard.
Paul Merrick, director of commodities at Dresdner Kleinwort Wasserstein
in London, told Platts Tuesday morning that US strength "has kept a lid on"
gold prices and the strength of the US dollar had pushed the gold price down.
He added that looking at Monday's price action, the gold price declined as the
dollar strengthened.
Bulliondesk.com analyst James Moore said in his morning report that with
investors "now seeking safety in the dollar rather than gold it looks as if
further rallies may be used to liquidated longs, rather than generate fresh
gains." He said while tensions in the middle east still had the scope to
trigger further price spikes, "I think gold should look to spend more time
back in the $610-55/oz area as the summer holiday slowdown begins."
Meanwhile in the currency markets the dollar gained against the euro to
$1.2515 at 0918 GMT Tuesday from Eur1.2520 at 1600 GMT on Monday. The
dollar/yen was steady at Yen 117.
---Michelle de Klerk, michelle_deklerk@platts.com

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