Gold holds near record as US dollar suffers

Gold holds near record as US dollar suffers

Gold edged up on Monday and hovered near last week's lifetime high above $1,100 on a falling US dollar and after a weaker-than-expected US unemployment rate revived worries about the health of the global economy.

Gold has gained as much as 25.2 per cent in 2009, driven by persistent weakness in the US currency, and recently by the failure of a meeting of the Group of 20 finance officials to talk more specifically about the dollar's decline.. "The fundamental outlook for gold remains favourable. We expect a renewed test of the $1,100 mark for gold prices this week," Credit Suisse said in a research report.

Cash gold added $3.95 an ounce to $1,100.25 an ounce by 0306 GMT, having hit an intraday high of $1,100.40 - within striking distance of Friday's record high of $1,100.90. "We are in uncharted territory," said Darren Heathcote, head of trading at Investec Australia in Sydney.

"The trend is still intact. We're still looking at a positive gold market. (There) doesn't seem to be any particular reason to be selling. I don't, therefore, see it falling much below $1,100." US gold futures for December delivery rose $5.0 an ounce to $1,100.7 an ounce after striking a record of $1,101.90 last week. Japan's foreign reserves rose to a record high for the third straight month in October partly as rising gold prices inflated the value of its gold holdings, the Ministry of Finance said on Monday.

The dollar index slipped 0.23 per cent to 75.646, while the euro edged up to $1.4870, with a statement from the IMF that the dollar remained on the "strong side" despite a recent sell-off spurring another bout of selling in Asia.

US employers cut 190,000 jobs in October, greater than the 175,000 fewer jobs forecast, and the unemployment rate rose to 10.2 per cent, a 26-1/2-year high that was above average forecasts of a 9.9 per cent rate and "I think we are going to be looking for more economic data to decide where we go from here," said Heathcote of Investec Australia. "We're probably still trading on thin volumes at the moment."

The world's largest gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings stood at 1,108.344 tonnes as of Nov 6, unchanged from the previous business day. Noncommercial net long US gold futures positions fell 0.2 per cent to 241,319 lots in the week to Nov. 3 from 241,777, a weekly report by the US Commodity Futures Trading Commission showed.

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SHILPI KUMARI

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