Gold continues to trade above $1500 on weak dollar

Gold resumed its rally to continue to trade above $1500 a barrel due to the ongoing weakness of the dollar which gave support to dollar-denominated commodities, especially gold as an alternative investment.

One of the key factors that helped gold to continue rising in the depreciation of the dollar against majors. The near zero interest rate and QE2 caused significant depreciation to the dollar which fell to 15-month low against the euro.

What added to the vulnerability of the dollar is Standard and Poor's downgrade to US debt rating to negative from stable as it raised concerns that the US may lose its AAA rating and thereby the high debt may affect recovery path.

The dollar index, which tracks the dollar movements versus a basket of major currencies, dropped to a low of 73.86 compared with the day's opening level of 74.34.

Commodity indicators advanced after the dollar's drop; S&P GSCI added 12.92 points to 748.47 and Rogers INTL augmented 11.53 points to 4377.04.

Oil also touched a high of $112.39 a barrel from the day's opening of $111.45 as the unrest continue in the Middle East and North Africa and equities rallied on upbeat earnings.

The rally in equity enhanced demand on risky assets by gold benefited from the drop in dollar to continue its record-smashing journey.

The precious metal has been advancing since 2011 and surged this year because of the rise in inflation, escalation of European debt crisis, Japanese nuclear leaks and the dollar weakness.

Gold is currently trading at $1506.52 an ounce after recording all-time high of $1508.77 and a low of $1500.35, yet it may do some downside correction as it is currently trading in an overbought area, as depicted by the Stochastic Oscillator momentum indicator.

Among other precious metals, platinum soared to $1808.00 from the day's opening of $1804.50, palladium inched down to $762.50 from $764.70 and silver edged up to $45.90, 31-year high, from $45.55, as of 07:30 GMT.