Price of gold remains stuck near $1600, oil and other commodities watching US dollar

The price of an ounce of gold remains stuck near $1600 and fell in trading yesterday with oil and other commodities tracking the dollar after the US Fed decided against any more QE for the meantime, which may boost the US dollar’s strength this week and weigh on gold prices.

Latest Gold Price

Gold prices, which nearly hit $1600 a troy ounce in earlier trading, lost more than 1 percent after Mr Bernanke’s testimony. In midday New York trading, the precious metal was trading down 0.2 percent at $1,586.54.

Gold’s recent lacklustre performance was putting to the test investors’ faith in the precious metal, said Tom Kendall, precious metals analyst at Credit Suisse. The metal had not performed as a haven because of deflationary pressures, and funds flowing into the dollar and other US assets such as Treasuries.

Gold Price Forecast 2012

Gold experts have further cut back price forecasts for the metal this year after a sluggish first half, a quarterly Reuters poll showed on Monday, while gains in the US dollar and a lack of physical demand are likely to clip any attempted return to last September’s record high for the rest of the year.

Gold is still on track to post another record-breaking average in 2012, extending its bull run into a twelfth year as ultra-loose monetary policy in key economies keeps interest rates at rock bottom.

But the median spot price forecast has been cut to $1,685 an ounce from $1,750 projected in a similar poll at the end of the first quarter, and $1,765 forecast at the start of the year.

“In the main, the dollar will be holding gold back, but the dollar can be trumped as the key driver for gold – and the key to that is heightened economic or political turmoil,” said Ross Norman, chief executive of precious metals trader Sharps Pixley.

Commodity Prices and the Dollar

A strong US dollar tends to pressure commodity prices lower as they are priced in the currency. Gold traders will be watching the dollar on currency markets and will also be keeping an eye on financial data coming out of America for clues on the short term direction for the precious metal.

Meanwhile, oil prices seem to be holding up reasonably well, mainly due to the situation with Iran and the Strait of Hormuz which has crude traders on edge, with many concerned that any closure of the strait would send oil rocketing higher.

Read more here:
Price of gold remains stuck near $1600, oil and other commodities watching US dollar