Potential End of Dollar-Based Oil Deals Helps Gold Shine
Source: MarketWatch, Myra P. Saefong (10/6/09)
"The report is 'absolutely bullish,' for gold. . ."
And the strength was kept even as several top officials, including Saudi central bank chief Muhammad al-Jasser, denied the report.
Gulf Arab states, along with China, Russia, Japan and France, are planning to put an end to dollar-based trading in the oil market, according to an exclusive report published Tuesday in the UK by The Independent.
"News on gold's expected future role in oil transactions between these trading partners has sent the price past $1,020," said Peter Spina, chief investment analyst at GoldSeek.com.
In place of the greenback, the nations plan to use a basket of currencies, including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar, the report said.
The report is "absolutely bullish," for gold, said Peter Grandich, a metals writer at Agoracom. "I've not see gold's fundamentals this bullish in years."
The December contract for gold closed Monday with a gain of $13.50, or 1.3%, at $1,017.80 an ounce. By the morning in London, December gold was up $2.80 to $1,020.70.
Many analysts had attributed the gains Monday to higher demand in the face of more weakness in the U.S. dollar.
But, as Spina pointed out, trading gold and other currencies in exchange for oil would "establish gold as a recognized medium of exchange, returning it a step closer to its role as money on a world trade system."
So the price of gold "should continue to find upward price pressures on this news," he said.