Dollar Strength Affects Prices at Gold Exchange Posted by James Randolph on March 09, 2010
March 9, 2010 – After trading steady for most of the session, futures prices at the gold exchanges dropped as the US dollar enjoyed another strong day. At 4:00 PM EST today, gold was down $3.90 to stand at $1,120.80 per ounce while the US Dollar Index was up 0.148 to 80.58.
Both gold exchanges and the dollar appeared to be reacting to comments by Yi Gang, the head of the State Administration of Foreign Exchange of China when he stated that it is unlikely that bullion will be the country’s main reserve investment. The country has increased its gold by 454 tonnes to its current 1,054 tonnes, still only a fraction of the nearly $2.4 trillion that China has in its currency reserves.
“It’s all about the dollar,” said Leonard Kaplan, the president of Prospector Asset Management. “With the dollar continuing to strengthen, gold doesn’t have a chance. There isn’t enough gold for China to make it its primary reserve. They have to hold dollars.”
Demand has struggled with the strength of the dollar. “These prices are not attractive enough for physical buying,” said Bernard Sin, the head of currency and metals trading at bullion refiner MKS Finance SA in Geneva. “People are looking for a dip to come into the market.” The decline at the gold exchange may be an opportunity to buy, with analysts such as Dennis Gartman, an economist and editor of the Gartman Letter. Gartman has previously advised holding gold in foreign currencies, and now suggests buying gold denominated in dollars as well.
Senior Staff Writer – Certified Gold Exchange