Gold and Precious Metals — Gold Rebounds, Rises Back Toward $1,140 - Gold * US * News * Story

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Gold Rebounds, Rises Back Toward $1,140

Published: Tuesday, 17 Nov 2009 | 2:47 PM ET

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By: Reuters

Gold rebounded after spending most of the day in the red, after the previous day's rally to record highs.

Spot gold [US@GC.1 Loading... () ] stood at around $1,140 an ounce, against $1,139.05 late in New York on Monday. It touched a record high of $1,143.25 an ounce that session.

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U.S. gold futures for December delivery on the Comex division of the New York Mercantile Exchange rose 20 cents to settle at $1,138 an ounce.

"The uptrend is definitely firmly entrenched. $1,100 has proven to be a bit of a base," said Ole Hansen, senior manager at Saxo Bank.

"Technically, it's very overbought...indicating a period of stable prices or a bit of a setback before it gathers strength to make new highs," he added.

Platinum group metals also lost traction in line with gold as the dollar firmed, retreating from multi-month highs.

In an update of its Platinum 2009 report, major refiner Johnson Matthey said platinum prices could top recent 14-month highs to hit $1,550 an ounce in the next six months if investment demand added to a recovery in car sales.

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As gold is a non-interest bearing asset, the opportunity cost of holding it is reduced when rates are depressed.

Opportunity costs represent possible profit shortfalls incurred by passing up on investments with potentially higher returns.

Gold's chief support has been weakness in the U.S. dollar, which slipped against a basket of six other currencies on Monday after senior Federal Reserve officials said U.S. interest rates will remain low.

However, the currency bounced back early on Tuesday, with the dollar index firming 0.83 percent. This has curbed gold's appeal as an alternative asset, and also makes all dollar-priced commodities slightly more expensive for other currency holders.

Oil edged lower after posting hefty gains on Monday, with traders citing the firmer dollar as a curb on the market, while base metals also gave up the last session's gains.

Consumer Demand

Gold dealers in India, the world's biggest bullion market last year, reported higher scrap sales on Tuesday after gold hit a fresh record high, but domestic demand abated after a slight pick-up late in the previous session.

Consumer demand for gold has been weak this year as prices have risen, but more buying has been taking place among central banks, who in recent years have chiefly been sellers of gold.

The International Monetary Fund said on Tuesday it sold two tons of gold to the central bank of Mauritius at prevailing market prices on Nov. 11.

Reports of the acquisition by India of 200 tons of IMF gold early in November were a key factor driving prices to record highs above $1,100 an ounce.

"It is clear that central banks are seeking ways to increase their gold exposure," said Fairfax analyst Marc Elliott.

Among other precious metals, spot silver was bid at $18.23 an ounce [US@SI.1 Loading... () ] against $18.36. The metal touched a peak of $18.43 on Monday, its firmest since July 2008.