Gold Bounces as USD Retreats

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"Yesterday's breakout paved the way for gold to rise further today."

Precious gold surged for the second day, poised for its second weekly advance, as USD pared some gains this week after news that the German economy grew 2.2%.

The drop in the dollar increased the appeal of the shiny metal as an alternative investment. The Dollar Index slipped to 82.28 compared with yesterday's closing of 82.58.

On the other hand, the euro strengthened against majors after the better-than-estimated German expansion. The largest economy in the eurozone expanded 4.1% on annual basis (non-seasonally adjusted) from the revised 2.1%.

The surprising expansion boosted the euro and provided evidence that the euro-area economy is on the right track. However, further gains in gold may be expected after the release of GDP for the eurozone, which is expected to show 0.7% this quarter from 0.2% in the first three months of 2010.

Yesterday, gold added $15.60 or 1.30% to close at $1,213.60/oz. The gold price was set in London Thursday at $1,213/oz. during PM fixing rising from $1,200. in AM fixing. SPDR gold trust, the world's largest bullion-backed ETF, edged up 0.91 metric tons on August 12 to 1,286.70.

Spot gold is trading at $1,215.86/oz. after recording a high of $1,217.34 and a low of $1,211.37. Gold is preparing for its second weekly advance this week after falling for six weeks in a row.

Technically speaking, the breakout of $1,200 level yesterday and daily closing above paved the way for the yellow metal to rise further today.

Among other precious metals, platinum soared to $1,533.70 from $1,525.20 on Thursday; palladium increased to $472.90 from $469.20; and silver rose to $18.15 from $18.12, as of 07:50 GMT.

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