Can gold consolidate in the face of higher inflation reports and lower interest rates?
*Reuters, by Tamora Vidaillet, May 1, 2008:
"Gold changed course to touch a three-month low on Thursday after
gaining nearly 2 percent as a dollar rise on the back of U.S. inflation
data prompted bullion investors to liquidate trading positions.
Gold fell as low as $851.70 an ounce after hitting a high of $881.30.
It was quoted at $852.30/853.00 at 1412 GMT, against $864.65/866.05 in
New York late on Wednesday.
'There is a certain investor fatigue that has crept in the market in
the last few weeks and I think it is going to take a bit of oomph to
get it going again,' said Stephen Briggs, economist at SG Corporate and
Investment Banking.
'I feel that the risk is more that rather than how much it will go up
if the dollar weakens, it is how much it might go down if the dollar
fails to weaken,' he said.
The earlier jump in gold followed the latest move by the U.S. Federal
Reserve to trim rates by a quarter of a percentage point on Wednesday.
That prompted the dollar to weaken initially against the euro.
Investors struggled to interpret the Fed's take on the economy and were
left wondering whether it would be the last in a series of rate cuts.
The dollar hit a five-week high against the euro as U.S. inflation data
showed rising price pressures in the economy, which suggested that the
pace of the Federal Reserve's monetary easing could slow.
A firmer dollar makes gold costlier for holders of other currencies and
often lowers bullion demand. Also, lower interest rates tend to boost
gold's appeal as an alternative investment to stocks and bonds."
*This information is solely a highlight of the opinion of a third-party publication and is incomplete. Please subscribe to this publication for the full and timely opinion of the author and call a Monex Account Representative for any additional up-to-date information. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.
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