Gold hovers near $1000 as the dollar dips further

The yellow metal is traded near $1000 an ounce as the U.S. dollar continues its downside fall, enhancing demand on the metal as an alternative to the vulnerable dollar and as a better investment.

Analysts are now predicting that gold is taking breath before rising further above $1000; however, the metal has to remain above it today to continue its rally. Spot gold is now traded at $998.75, close to the highest level since March last year, recording a high of $1002.85 and a low of $994.52. Meanwhile, it is gaining support at $996 that may lift the metal to close above $1000, therefore breaching the $1000's psychological barrier.

Gold advanced more than 12% this year and is girding for the fourth weekly advance this week thanks to the green currency that dropped for the sixth day in a row, marking its longest stretch of decline since March 2008. The dollar index, a measure of the dollar's strength against six major currencies, is now at 76.65 compared with the opening at 76.81. The dollar touched its lowest in seven-month versus the yen today after the release of Chinese economic data showing improvement. Also, it signaled 9-month low versus the euro on signs the recession is over.

On the other hand, gold prices gained support from oil which is getting ready for its first weekly gain after dropping the last three weeks. Oil inclined to $72.12 a barrel recording a high of $72.35 boosted by China's industrial production which topped estimates and the weak dollar. The surge in oil prices revived demand on gold as a hedge against oil-led inflation.

Meanwhile, there is optimism in markets with the ongoing improvement in data released in major economies which are providing evidence the economic recession is receding. As long as economies are moving towards recovery and the U.S. dollar is bought as a refuge asset, the green currency is expected to depreciate more, therefore giving the chance for gold to witness new records.

Recently, gold has been moving with stocks in the same direction after they were moving oppositely earlier this year which indicates that gold lost its role as a safe harbor and now is losing momentum just awaiting direction from the dollar. U.S. stocks bounced yesterday as U.S. jobless claims plummeted to its lowest since 2 months, whereas Asian stocks gained on China's cheerful data.

The previous day, gold added $4.00 or 0.40% to close at $996.35 an ounce. Gold prices were setin London on Thursday at $990.75 an ounce, inclining from $988.50 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 10.

Among other precious metals, platinum edged up to $1292.50 from $1290.00at Thursday's closing; palladium declined to $289.50 from $290.00; and silver remained unchanged at $16.76.