Gold Goes Higher on Weak Dollar& Iraq Worries
New York (June 30) Gold prices edged up on Monday as a weaker dollar and continued worries about violence in Iraq stoked investors' interest in the precious metal.
Gold for August delivery, the most active contract, rose $2, or 0.2%, to settle at $1,322.00 a troy ounce on the Comex division of the New York Mercantile Exchange.
For the second quarter, gold ended the period up 3% as a rally that propelled prices to six-month highs in March came off the boil. The combination of an acute economic slowdown during the U.S. winter and fears that a conflict between Russia and Ukraine would escalate to a war prompted investors to buy gold as a hedge earlier in the year.
But both those worries are "off the boil at this point," said Frank McGhee, the head precious metals dealer with Integrated Brokerage Services LLC. in Chicago.
Instead, worries about the escalating conflict in Iraq--where Islamic militants have taken control of several cities in the country's north--have supported gold prices in recent weeks. Some investors buy gold as a hedge against geopolitical upheaval.
"The civil war in Iraq is still an issue for the marketplace," said Jim Wyckoff, a senior analyst with Kitco.com in a note.
On Monday, a weaker dollar, which fell against a basket of currencies, lent support to gold. The ICE Dollar Index was recently at 79.785, down from 80.085 earlier.
Gold is traded in dollars and becomes cheaper for foreign buyers in their home currency when the greenback eases.
Gold traders are also looking ahead to the U.S. nonfarm payrolls data, due out on Thursday. The closely watched gauge of U.S. labor market health could surprise higher, sparking a selloff in gold as worries return about a hawkish turn from the Federal Reserve, Mr. McGhee said.
Gold is considered a currency alternative and a store of value, and many investors bought the metal to guard against high inflation and a weaker dollar, two risks associated with the Fed's loose monetary policies. Last year, gold prices plunged 28% amid expectations that the Fed would begin curtailing those efforts, a move announced in December.
"At the end of the day, it's a question of geopolitics versus the economy, and the economy always wins," Mr. McGhee said.
Source: WSJ
