Gold Advances in London as Weaker Dollar Bolsters Demand
By Maria Kolesnikova and Glenys Sim - May 31, 2012 6:54 AM ET
Bloomberg.com
Gold, heading for its longest run of monthly losses in almost 13 years, gained in London as a weaker dollar bolstered demand for commodities.
The euro rose from the weakest level in almost two years against the dollar as Spanish and Italian bonds rallied and polls suggested Irish voters will back Europe’s fiscal treaty. Bullion is 5.9 percent lower in May for its biggest drop this year as the dollar rallied 3.3 percent against a six-currency basket including the euro.
“There’s definitely been a flight to the dollar rather than gold as a shelter from the
crisis in Europe , which doesn’t look like it will abate soon,” said Wang Xiaoli, chief
investment strategist at CITICS Futures Co., a unit of China’s biggest listed brokerage.
“We’re encouraged by the gains made by gold yesterday even as the dollar strengthened.”
“Lately gold has been strongly correlated with the dollar,” said Bernard Dahdah, a London-based analyst at Natixis Commodity Markets Ltd. “Today the euro is up a little, which has led to a slightly weaker dollar and so a slightly higher price of gold. Aside from the euro-dollar situation, we have weaker demand for gold from India because of economic woes which is leading to a depreciating rupee.”
Spot gold rose 0.2 percent to $1,566 an ounce by 11:38 a.m. in London. The metal was up 0.1 percent this year. August- delivery bullion was little changed at $1,567 an ounce on the Comex in New York.
A fourth monthly decline would be the metal’s longest run of losses since the period to August 1999. Holdings in the SPDR Gold Trust, the biggest bullion-backed exchange-traded fund, are set for a third monthly decline, according to data on the company’s website.
“Investors don’t have the same strategic approach to gold as before,” Edel Tully, an analyst at UBS AG, said in a report today. “Much of the exposure to gold has been on an intra-day bias of late. The market is too highly correlated with risk for many participants’ liking.”
More: http://www.bloomberg.com/news/2012-05-31/gold-poised-for-worst-monthly-run-in-13-years-on-european-crisis.html
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