Gold, oil down on rising US dollar

Gold prices continued to tumble yesterday falling to about $US810 ($NZ1162.5) as demand for the US dollar rose amid a further weakening in global oil prices.

The strengthening dollar saw the New Zealand dollar hit an 11-month low against the greenback , falling to US69.70 by 5pm yesterday.

Gold and oil generally track each other, and the market saw oil softening markedly from a high six weeks ago of $US147 a barrel to $US113 to $US115 yesterday, with analysts now looking at a return to $US100 a barrel.

Despite the flaring conflict between Georgia and Russia boosting oil prices about $US1 because of concerns surrounding oil and gas routes in the Caucasus, the oil price has continued to slide, offering New Zealand consumers some hope of petrol prices below $2 per litre soon.

ABN Amro Craigs broker Peter McIntyre and New Zealand Mint bullion dealer Mike O'Kane concurred the gold price was falling because investors were leaving the commodities sector in favour of the equities market in response to the strengthening US dollar.

Gold, which hit a record $US1033.90 in mid-March, has been the safe haven commodity for investors in recent months as oil rose to reach a record $US147.27 per barrel in early July.

At the same time, sharemarkets around the world booked huge declines in the wake of the worldwide credit crunch and writeoffs associated with the earlier subprime mortgage debacle.

However, the recent strengthening of the US dollar and greater sharemarket stability have prompted a sell-off of gold, with $US35 shaved off the price in a single day this week and prices down about 16% on about a month ago.

Mr O'Kane said interest in gold had been strong from January through to July and, with the price now falling, there was increased interest from people waiting for the right moment to buy in for a long-term investment.

Mr McIntyre said investors were taking earlier gains made in gold and relocating them to equity markets.

The London Metals Exchange registered the gold downturn, the metals sector taking a hit with price falls in silver, platinum, palladium, copper, aluminium, nickel, tin, lead and zinc.

Mr O'Kane said demand for gold in India, one of the world's biggest gold buyers, had dropped 48% in the year to July, but with the price falling, India was expected to re-enter the market in preparation for the October to February wedding season.

Many gold-miners have switched in the past 18 months from selling on forward-order contracts to the daily spot market, including Australian giant Newmont Mining Corporation and New Zealand's largest miner, Oceana Gold.

However, both have booked increasing production costs and the continued erosion of spot prices will further constrict profit margins.

 

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