Gold continues its rally above $1000

The shiny metal is extending its advance above the $1000 level, marking the longest stretch of gains since nine months as the dollar continued its slide which increased the appeal of the commodity as a hedge against the weak dollar.

The previous day, gold added $2.20 or 0.22% to close at $995.00 an ounce. Gold prices were setin London on Tuesday at $1000.75 an ounce, declining from $1004.50 an ounce during the AM fixing. SPDR gold trust, the world's largest exchange-traded fund backed by bullion, stood at 1,077.63 metric tons on September 8.

Gold inclined for the seventh consecutive day while it is touches the $1000 for the second day. Traders are now waiting to see how long the metal can stay above the $1000. If prices remained above $1000 this week, we may see a new historical high that exceeds the previous $1035 recorded last year. Gold will face the next resistance at $1012 then $1015. However, it may face downside pressure on profit taking by traders.

The U.S. dollar after sliding for three days is now steady at 77.33 as seen by the dollar index which tracks the dollar's movements versus six major currencies. The weak dollar increased the demand on bullions as better investment and encouraged buying by other currencies since it became cheaper. The dollar index fell 5% this year, and with the ongoing improvement and recovery signs the green back is anticipated to decline further since it together with the yen are considered refuge assets. There have been talks recently with regard the role of the dollar as the leading global currency after its depreciation.

In the previous period gold lost its role as a safe haven and has been moving opposite to the dollar which enabled it gain strength, taking advantage of the dollar's fall. Surprisingly, traders are now buying the metal with signs of recovery as a profitable investment.

On the other hand, the money pumping in markets by governments and central banks is raising concerns of inflation. World economies have announced $2 trillion stimulus packages this year in order to reinvigorate their economies and rekindle growth; the thing that supported gold as an inflation hedge.

Spot gold is now at $996.92 an ounce recording a high of $1003.15 and a low of $994.90. Among other precious metals, platinum inched up to $1289.00 from $1288.50at Tuesday's closing; palladium declined to $292.50 from $293.00; and silver ticked down to $16.45 from $16.49.