Gold drops from 18-month high

Precious-Gold fell on Friday from its highest level in a year and a half as the U.S. dollar rebounded today, eroding the appeal of the metal as an alternative investment.

The previous day, gold shed $5.00 or 0.49% to close at $1013.24 an ounce. Gold prices were setin London on Thursday at $1018.50 an ounce, declining from $1020.50 an ounce during the AM fixing. SPDR gold trust, the world's largest exchange-traded fund backed by bullion, stood at 1,086.479 metric tons on September 17.

Despite the drop in gold prices, it is still above $1000 an ounce. Yesterday was the fifth day where the metal closed above $1000. Fluctuationsare expected to be witnessed at this level as there will be downside pressure from investors on profit taking in addition to strong technical resistances at $1025 then $1035. However, analysts are expecting the metal to breach its historical level in the coming period supported by the dollar weakness and inflation concerns.

The U.S. dollar rebounded today from its lowest level this year against a basket of major currencies as indicated by the dollar index on the daily charts. The index is now at 76.45 compared with the opening at 76.19. The dollar strengthened on financial concerns which boosted demand on the dollar as a refuge asset. Now, the green currency is oversold and a rebound is expected to occur. Thus, gold prices may retreat if the dollar managed to rebound strongly.

Moreover, stocks in the U.S. a day ago and in Asia today sagged impacted by financial institutions shares. S&P 500 dropped from 11-month high and theMSCI Asia Pacific Index slipped form it s highest level in 12 months. Meanwhile, there are some fears that financial crisis may be prolonged which outweighed the positive effect of thebuoyant housing data released in the U.S. on Thursday.

With regard to other commodities, oil plummeted on profit taking and as dollar strengthened and stocks dipped. The tumble in oil prices is expected to cause more downside pressure on the shiny metal prices as itlowers concerns with regard inflation. Oil is now traded at $71.92 a barrel recording a high of $72.40 and a low of $71.82.

Spot gold is currently traded at $1011.80 an ounce, recording a high of $1015.19 and a low of $1010.28. Among other precious metals, platinum edged up to $1339.50; palladium inclined to $295.00 and silver climbed to $17.14.

Today, there is no economic data from the U.S. and less important data from Europe, therefore technical corrections are expected to take place at the week end where many investors are closing their potions.