Gold recedes as dollar recovers

March 20, 2009

Commodity Online
LONDON : Gold edged down on Friday as the dollar's recovery versus the euro prompted profit taking, pressuring the metal from a three-week high it hit in earlier trade.

However, prices remain firmly underpinned by investors' interest in the metal as a haven as they worry about the outlook for inflation and dollar weakness in the wake of the U.S. Federal Reserve's move towards quantitative easing.

Spot gold hit a peak of $966.70 an ounce, its firmest since Feb. 25. It had eased to $954.25/955.75 an ounce as the dollar recovered lost ground against the euro.

Prices have risen sharply since the Fed announced plans on Wednesday to buy $300 billion in longer-dated Treasuries, flooding the market with dollars and prompting a sharp drop in the value of the U.S. currency and a rise in inflation fears.

Gold has benefited from a sharply weaker dollar, which boosts interest in the precious metal as an alternative asset.

The dollar was heading for its biggest weekly fall in 24 years earlier in the session, though worries over the euro zone economy have since lifted it from lows versus the single currency.

Investor interest in gold remains firm, with the world's largest exchange-traded fund, the SPDR Gold Trust , reporting a fresh 15.28-tonne inflow on Thursday which brought its holdings to a record.

Buying of gold by ETFs, which back the securities they issue with physical stocks of bullion, has formed a major plank of demand in recent months. SPDR alone has added 323 tones of gold to its reserves so far this year, against 17 tones a year ago.

Spot platinum was at $1,111/1,116 an ounce from $1,122.50, while spot palladium was steady at $203/208 an ounce from $203.50.

Spot silver edges down to $13.52/13.58 an ounce from $13.57.

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