Gold drops on profit taking and drop in oil prices

Gold dropped for the second day after touching new fresh high yesterday as the rise in prices encouraged profit taking behavior by investors.

The previous session, gold shed $1.70 or 0.12% after reaching all time high of $1444.76, while gold price was setin London at $1437.50 per ounce inclining from $1437.50 during the AM fixing.

Spot gold is traded at $1428.03 after recording a high of $1433.00 and a low of $1425.84.

Gold was affected by the drop in oil prices which were the main booster of gold since the beginning of upheaval in the Middle East and North Africa.

Oil plummeted from a high of $106.93 yesterday to trade at $103.65 today as Kuwait mentioned that OPEC is on talks to increase production which may take place next month to halt the price's rally.

An intervention by the oil cartel may affect both oil and gold prices by pushing then to the downside.

The unrest in Libya, which has the largest oil reserves in Africa, has increased demand on gold as safe haven, but some news agencies reported that Leader Qaddafi is trying to find an agreement to step down peacefully.

However, the spread of protests seem to be moving to other oil-rich countries such as Saudi Arabia and Qatar as some activists planned to organize protests this month.

In the FOREX market, the US dollar rebounded against a basket of major currencies as the dollar index rose to a high of 76.64 from the day's opening level at 76.47.

Yet, gold has not received direction from dollar since the beginning of the MENA region tensions.

Today, there is not key data from major economies except for German factory orders which is expected to show progress in January, thereby may help the euro to continue its rise above nine-month high versus the green currency.

Among other precious metals, platinum edged up to $1812.20 from the day's opening of $1810.50, palladium soared to $786.00 from $779.70 and silver inched down to $35.80 from $34.85, as of 08:20 GMT.