Newsletter
Poll: Will Obama = Freedom?
Forbes - Gold rallied after the dollar weakened when Fed Chairman Ben Bernanke highlighted the dangers of the sub-prime fallout to the US economy in his semi-annual testimony to Congress. Gold tends to move counter to the dollar, as it is seen as an alternative asset to the world's most common currency reserve.
'The dollar is weaker and that is the main driver for gold right now,' said Calyon analyst, Michael Widmer. 'Now it's slipped below 1.38 versus the euro, everything seems to be pointing to the problems in the housing market and the potential for lower (US) interest rates weakening the dollar further.'
At 4.45 pm, spot gold was trading at 672.90 usd an ounce, compared with 665.00 usd in late New York trade yesterday.
Some analysts believe gold is asserting its position as a wealth guarantor in times of market volatility, following Bear Stearn's announcement that two of their stressed hedge funds are now essentially worthless after investing heavily in the US sub-prime market.
'Gold hasn't just risen because of the dollar, it's risen against sterling as well,' said BullionVault.com analyst Adrian Ash. 'A lot of people are concerned about Bear Stearns (nyse: BSC - news - people ), and the level of fear you're seeing in the market is bringing people back to gold.'
Gold is further supported by oil prices trading close to all time record highs. Prices have received a further boost from falling US inventories today.
Bullion often rises in line with oil as it is used as an inflationary hedge against higher fuel costs.
The lack of buying by jewellers, turned off by high prices in the historically quiet summer period, has limited some of gold's gains.
Among other precious metals, platinum is up to 1,318 usd against 1,308 usd after reports that South African mine workers rejected a pay offer from Northam Platinum, increasing the likelihood of strike action.
Its sister metal palladium fell to 365 usd against 366 usd.
Silver was up to 13.17 usd against 12.93 usd.
News
