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Gold drops as dollar rebounds
Gold prices edged down on Wednesday after snapping a three-session winning streak the day before, with the dollar’s firmness curbing bullion's appeal as a currency alternative.
Gold prices edged down on Wednesday after snapping a three-session winning streak the day before, with the dollar’s firmness curbing bullion's appeal as a currency alternative.
Trading remained very subdued with many Japanese players out of the market for new year holidays until January 4.
Market players eyed the dollar, which kept the firmer tone it has developed recently on shifting sentiment about the outlook for U.S. rates in view of improving economic data.
Some traders said the correction in gold prices was about to end as dollar short-covering, which was partly responsible for the dollar's recent rebound, was also nearly completed.
Bargain-hunting interest was expected to keep gold supported around $1,080 an ounce (Rs 16,252 per 10 grams), traders said.
Looking into 2010, gold is likely to recover in the first few months due to prospects for the dollar to fail to rise significantly, said Masayo Kondo, president of Fisco Commodity in Tokyo.
The Federal Reserve is not expected to raise interest rates in the first half of the year at least, and the huge U.S. budget deficit will keep the dollar pressured while problems in housing loan repayments will weigh on banks' financial health, he said.
"All these factors are dollar negative, which benefits gold. Gold may turn weaker towards the end of 2010 depending on economic data and views on U.S. interest rates," Kondo said.
A weak dollar boosts gold's appeal as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies.
Spot gold had tumbled to a seven-week low of $1,074.10 an ounce (Rs 16,163 per 10 grams) last week before the holidays.
