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Dollar strenghtens weakening gold { June 18 2006 } Original Source Link: (May no longer be active)
http://www.washingtonpost.com/wp-dyn/content/article/2006/06/18/AR2006061801087.htmlhttp://www.washingtonpost.com/wp-dyn/content/article/2006/06/18/AR2006061801087.html
Gold bows to strong dollar
By Chikafumi Hodo
Reuters
Sunday, June 18, 2006; 11:49 PM
TOKYO (Reuters) - Gold fell on Monday as the dollar's rise and weaker oil prices prompted light selling by investors who are wary of taking large buy positions after last week's sell-off, while technical levels capped any gains.
Early rounds of bargain-hunting ran out of steam quickly after spot gold edged as high as $580.10 as investors found few reasons to take new buy positions actively.
At 0319 GMT, spot gold was trading at $575.30/576.00 an ounce, compared with $578.00/578.70 late in New York on Friday. Gold climbed as far as $585 on Friday.
"The dollar's strength is clearly negative for gold," said Takashi Ogura, manager at Kanetsu Asset Management Co. Ltd.
"Gold has rebounded from lows, but it's still very fragile as there are plenty of people looking for chances to sell on strong price gains," Ogura said.
On the upside, gold was capped around the seven-day moving average (MA) of $580, while it was expected to be supported at its 200-day MA of around $548.
Spot gold was put under strong selling pressure last week, falling as far as a three-month low of $543 last Wednesday after reaching a 26-year high of $730 in mid-May.
Despite gold being off the three-month low, traders were not convinced about the outlook for the market as the latest strength of the dollar undermining sentiment.
The dollar struck an eight-week high of 115.78 yen on Monday as the market braced for an interest rate rise by the Federal Reserve in June and possibly another hike in August.
The U.S. currency received additional support against the yen as the Japanese unit was undermined by reports of a possible missile test by North Korea.
A stronger dollar usually pressures gold, which is generally priced in dollars globally, because it becomes costlier in key overseas trading areas like Europe and Asia.
A weaker oil price was another factor weighing on gold.
The key U.S. light, sweet crude price was easing from $70 on Monday, with dealers weighing more positive signals from Iran on its atomic program.
Gold often tracks oil prices because investors use the metal as an inflation hedge when energy prices are high.
"The market is still watching gold with caution as there is a bigger chance for global funds to flow out from commodities," Kanetsu's Ogura said.
Key most-distant April gold on the Tokyo Commodity Exchange <0#JAU:> ended morning trade at 2,162 yen a gram, down one yen or 0.05 percent from Friday's close. It had moved in a range of 2,161 to 2,171 yen in the morning.
Silver fell to $10.07/10.17 an ounce from $10.13/10.23 late in New York.
Platinum drifted down to $1,146/1,153 an ounce from $1,147/1,155 in New York.
Sister metal palladium inched up to $299/306 an ounce from $300/305.
© 2006 Reuters
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