14/08/07: Gold takes brief tumble

The strength of the dollar against the euro forced gold a little lower on Tuesday (August 14th) but experts do not expect the trend to last.

A variety of macroeconomic factors allowed the dollar to rise to a six-week high against the euro on Tuesday, including growing speculation that the European Central Bank will not need to raise interest rates.

But according to Reuters, analysts believe that pressure on gold will be relieved thanks to support from investors who are in search of protection from financial uncertainty.

"We are in an environment at the moment where the dollar is a bit stronger, that's putting pressure on gold," John Reade, analyst at UBS, told Reuters.

"There's a little bit of evidence of safe haven buying, stopping the price from falling too much."

Analysts have seen "heavy flows of money into exchange traded gold funds" in recent weeks, according to the report. Indeed, StreetTRACKS Gold Shares held 509.29 tonnes of gold at the start of the week, just short of the month's record high.

A research note from JPMorgan claims that demand for gold from the EFT community is currently being undermined by less impressive demand from large-scale investors.