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Gold tops $1020 on dollar drop

06 October 2009 11:45 (UTC +04:00)

Baku-APA-Economics. Gold rose toward $1,020 on Tuesday as the dollar fell against the euro and crude oil maintained its strength, although some resistance emerged around that level, Reuters reported
Purchases of bullion were picking up in India, a top consumer of the precious metal, providing support for the market. Buying traditionally typically increases in India during Diwali, the Hindu festival of lights.
Traders said U.S. gold futures remained vulnerable to liquidation because of near record high positions held by speculators.
Spot gold rose 0.3 percent to $1,019.75 an ounce by 0240 GMT (10:40 p.m. EDT).
U.S. gold futures for December delivery were at $1,020.5 an ounce, also up 0.3 percent.
The dollar fell against the euro and the yen on Tuesday after Britain’s Independent newspaper reported that Arab states were in talks to end the use of the dollar for oil trading.
The report also said talks center on using a basket of currencies, which included the yen, yuan, euro and gold.
Crude oil prices rose on Monday and remained above $70 per barrel on Tuesday, boosted by hopes of an economic recovery and despite news that the last prominent Nigerian militant leader agreed to halt fighting in the oil-producing Niger Delta.
Gold has historically gotten a boost from high oil prices as some investors look to the metal as an inflation hedge.
Bank of America Merrill Lynch said on Monday gold prices will hit $1,500 an ounce in 2011 when oil prices move back above $100 a barrel as emerging market growth creates shortages.
Spot gold rose to $1,023.85 last month, just short of the record high of $1,030.80 marked in March 2008.
Saito added, however, that crude oil prices were also vulnerable to dips given that there were lingering doubts about the strength of the global economic recovery.
The world’s largest gold-backed exchange-traded fund, the SPDR Gold Trust, said its holdings stood at 1,098.073 tonnes as of October 5, up 0.1 percent or 1.525 tonnes from the previous business day.
Other precious metals also rose, with spot silver up 1.5 percent at $16.84 an ounce.
Platinum was up 0.2 percent at $1,296 per ounce and palladium rose 0.2 percent to $299.