Gold held under the cloud of a resurgent dollar on Wednesday as funds held back from pushing the precious metal back onto its bull path which had taken gold this month to its highest level in more than two years.
Gold fixed at $307,50 a troy ounce in the London morning session, down from the previous level of $308,40 an ounce, to stumble to its weakest fix since April 26.
The precious metal has been thrown back from 26-month highs this week by the dollar’s recovery in foreign currency markets which makes gold more expensive for non-US investors and takes the shine off gold as the ultimate safe-haven for cash.
The dollar has reached a two-week peak against the euro as strong US data and yet another rally on Wall Street injected some confidence in the world’s biggest economy.
By 1015 GMT spot gold was at $307,50/308,00, virtually unchanged from New York’s Tuesday close.
Bullion soared to $313,65 an ounce on May 7, its strongest level since February, 2000 as investors scrambled out of the dollar and brittle equity markets and sought a safe haven for their cash, amid heightened tension in the Middle East.
This crowned a winning streak that has taken gold 18% higher since the start of this year and lifted a market which was at 20-year lows just two years ago.
But a recovery in US stock markets and the dollar and an easing of the crisis in the West Bank has taken the steam out of the metal’s charge higher.
Despite dollar-led selling, the outlook for gold remained upbeat because of strong industry fundamentals, analysts said.
Investment house UBS Warburg upgraded its average gold price forecast for 2002 to $305 an ounce from $296 an ounce previously and said the metal was likely to trade between $290-$335 for the remainder of this year.
”Gold has performed strongly in 2002, driven by reductions of the gold miners’ hedge-books and a welcome return of investment demand to the gold market,” said UBS Warburg analyst John Reade.
Leading gold companies have reduced their hedge books, or forward sales, to take advantage of rising spot prices.
UBS Warburg also increased its 2003 forecasts by six percent to $320 an ounce from $302 ounce previously. Its long-term forecast was raised from $300 an ounce to $325 an ounce.
Newmont posts loss
A decision by leading gold miners to reduce the amount of gold they sell in forward markets, disciplined bullion sales by European central banks and strong Japanese demand amid fears over the health of that country’s banking sector have all combined to underpin bullion.
Uncertainty over the prospect of fresh violence in the Middle East would also prompt fresh interest in gold.
In other gold news, world number one gold producer Newmont Mining Corp. reported a quarterly loss as sales of the precious metal rose 13.5% thanks to higher prices.
Newmont said its average realised price for an ounce of gold was $291 in the first quarter, up from $264 a year earlier.
The Denver-based company had a net loss of $10,9-million, or 4 cents per share, for the first quarter after a non-cash mark-to-market gain from derivatives of $12,3-million after tax. This compared with a loss of $39,1-million, or 20 cents per share, after a mark-to-market gain and merger-related charges in the first quarter of 2001.
Silver followed gold lower, to $4,60/4,62 from New York’s previous close of $4,61/4,63.
Platinum was at $534,00/539,00, unchanged from New York while palladium was flat at $353,00/363,00. – Reuters