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Gold drops from record but more gains seen
2009-10-06
SYDNEY (Reuters) - Gold held below its record high in early Asian trade on Wednesday, but could be set for another spike up as the U.S. dollar continues to struggle and inflation concerns grow, analysts said. Spot gold was quoted at $1,039.50 at 2245 GMT, based on Thomson Reuters data, retreating from an all-time peak of $1.043.45 set on Tuesday. "There was some profit taking initially, but given the fact that we continue to see further weakening in the U.S. dollar, people might be tempted to hold on and I think it will push higher," said Darren Heathcote of Investec Resources in Sydney. "The weight of it might well be to hold rather than sell." Gold has gained about 18 percent in the year to date. Spot gold and U.S. gold futures have benefited from a convergence of factors, particularly a hobbled U.S. dollar, as well as technical buying and concerns over inflation. "The sentiment today is certainly favoring gold from the standpoint of the U.S. dollar," said Nick Raffan, gold analyst for Fat Prophets in Sydney. "It certainly isn't going up on the basis of supply and demand, because demand is actually fairly weak," Raffan said. The U.S. dollar slid broadly on Tuesday after an interest rate hike in Australia underscored concerns the Federal Reserve will lag other central banks in pulling out of its loose monetary policy. Adding to pressure on the dollar was a British newspaper report that Gulf Arab states were in secret talks with Russia, China, Japan and France to replace the greenback with a basket of currencies in trading oil, though big oil-producing countries denied the report.
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