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Gold Near High on Dollar Weakness and Dovish Fed

Release Date: 
Friday, April 29, 2011

The prices of gold neared record highs on Friday with the U.S. dollar hovering near three-year lows against the basket of currencies which comprise the U.S. Dollar Index. The price of gold traded at $1538.30 per ounce at 6:05 a.m. Pacific Time on the New York Spot Market while silver was priced at $48.81 per ounce.

At the Fed meeting and following press conference on Thursday, the central bank indicated that U.S. monetary policy will remain accommodative, pushing the greenback lower. The generally inverse correlation between the U.S. dollar and the price of gold makes the precious metal less expensive for non-U.S. investors, while pushing up the gold price based on the dollar weakness.

New U.S. data on rising claims for jobless benefits helped suppress the dollar on Friday, which had dropped to its weakest level since July 2008 before recovering slightly. "If the dollar continues to weaken, then it's only likely to boost gold as well as silver as the inverse relationship between the two assets persists. I would say that for gold I am still looking for it to hit $1,600 this year," said Ong Yi Ling, investment analyst at Phillip Futures in Singapore.

Analysts at Credit Agricole conveyed optimism on gold prices after what the firm said was the dovish tone coming out of the Federal Reserve's policy board earlier this week. "The dips in gold should be well supported, as an upside chart target of $1,550/oz becomes the next objective," the analysts wrote in a morning research note.

(Sources: "Gold edges higher with few cues," MarketWatch,April 29, 2011; "PRECIOUS-Silver, gold near lifetime highs, dollar loses ground," Reuters, April 29, 2011)

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