Gold News

20/08/07: Gold gains as dollar drops

Gold gained on Monday (August 20th) as the dollar fell slightly, but industry experts are still cautious in the aftermath of the Federal Reserve's decision to cut interest rates on loans to banks.

According to Reuters, spot gold increased to $659.30 an ounce at its peak on Monday and then settled back to $658.40, which compares to $655.30 in New York on Friday after a $5 increase.

"Gold just bounced back with a recovery in stock prices and good physical demand on the lower levels. It's still a bit lower than the beginning of last week but has already recovered 20 dollars," Michael Kempinski, senior metals trader at Commerzbank, told Reuters.

"We are still expecting a nervous market. When the pressure comes back on the stocks, we also expect pressure on gold," he added.

The Federal Reserve's decision to cut interest rates on Friday came as a surprise to many analysts, but it managed to add some stability to the jittery financial markets.

However, speaking to Reuters today, a spokesperson for Standard Bank claimed that the volatility may not be over yet "as many investors are likely to continue to rebalance portfolios".

Gold is generally seen as a safe-haven investment but the increasingly prominent role played by commodities in diversified portfolios has meant the precious metal has "behaved much like other financial assets in recent months", the Reuters report adds.


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