Gold retreats towards $1,100/oz

Saturday, December 19, 2009
LONDON: Gold trimmed gains to retreat towards $1,100 an ounce on Friday as the dollar rose against the euro after reports that Iranian troops had briefly entered Iraqi territory prompted buying of the US currency.

Spot gold was bid at $1,100.65 an ounce at 1607 GMT, against $1,097.80 late in New York on Thursday.

US gold futures for February delivery on the COMEX division of the New York Mercantile Exchange fell $4.80 to $1,102.60. The euro fell below $1.4300 for the first time since September 4, as investors bought the dollar amid Middle East tensions. The Iran report lifted oil prices, which rose more than 2 per cent to above $74 a barrel, but gold, which often reacts to geopolitical tensions, shrugged it off to remain within its earlier range.

“Some scrap selling stands against some investor buying, and that is keeping (gold) range bound,” Heraeus trader Alexander Zumpfe said. Gold had risen more than 1 per cent earlier in the day, when the dollar was down.

Strength in the US unit curbs gold’s appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.

Gold prices found support around $1,080-$1,100, but analysts say it may be vulnerable to further losses through to year-end, especially if further dollar strength is seen.

“Trading will be relatively thin in the coming days so investors may be reluctant to take on positions in this market, and may be closing some positions,” said Commerzbank analyst Eugen Weinberg.

“As most investors have been on the positive side, the closure of those long positions might dampen sentiment and might dampen prices.”