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Home > Business > Business Headline > Report

Gold at 11-week high

May 26, 2003 11:49 IST

The precious metal gold peaked to 11 week high on the domestic markets Friday following higher international advices on weaker dollar.

Standard gold moved from Rs 5525 to Rs 5530 per 10 grams while gold of 999 purity moved up from Rs 5555 to Rs 5760 during the week. However silver lost its sheen during the week and fell from Rs 8075 to Rs 7900.

A guardedly optimistic review of the US economy by Federal Reserve Chairman Alan Greenspan on Wednesday breathed new life into the greenback.

But while the dollar's rally checked the run-up back towards February's 6-1/2 year highs, analysts said an apparent Al Qaeda call for holy war against Americans would keep investors flocking to the metal known as insurance against financial strife.

Gold has been rising steadily since bottoming out in early April, lifted by the weak dollar, economic woes and global destabilisation from Middle East bombings and fear of more attacks, and is within striking distance of the high of $388.50 hit on February 5.

"Growing concerns about the state of the global economy are attracting investors and speculators to play gold from the long side. This together with further weakening of the dollar could see gold back to and perhaps above the highs of the year at $390.00 an ounce," John Reade of UBS Warburg was quoted by Reuters.

Monday is Memorial Day in the United States and a public holiday in Britain. The New York gold market closes at around midday on Friday.

"With a long weekend in the UK and the US a certain amount of cautious long positioning is likely to be seen due to the raised threat of attacks," analysts said.

"We believe, however, that a move higher will probably need further dollar weakness. We continue to believe that speculative buying will power gold back up to and possibly beyond the high of the year at $390/oz in the next month or two," John Reade of UBS Warburg Precious Metals said.

Gold roared back into fashion this week, surging more than $20 as the dollar buckled against the euro and fears of terror attacks prompted investors to pad their portfolios with a metal known as insurance against risk.

Traders said the speculative nature of the current rally -- coinciding with dampened physical demand in India and China due to high prices -- made gold vulnerable to the kind of abrupt sell-off seen in February.

After topping $388.50, gold plunged almost $50 in less than two weeks, and continued to fall until early April.


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