09 Sep 2008
Sep. 9 (Bloomberg) -- Gold fell below $800 an ounce and silver slumped to the lowest in more than a year as the U.S. government's seizure of mortgage lenders Fannie Mae and Freddie Mac boosted the value of the dollar and reduced the appeal of bullion as an alternative asset. The U.S. currency traded near the highest level since October against the euro while gold fell to within 3 percent above its low this year. The dollar index, which tracks the greenback against currencies of six major U.S. trading partners, rose to a one-year high yesterday.
``It appears that the market is torn between those investing in gold ahead of the Indian wedding season and those selling gold as a result of the strength of the U.S. dollar and weak economic conditions,'' Jonathan Barratt, managing director of Commodity Broking Services, said in a report yesterday. Bullion for immediate delivery fell 0.7 percent to $796.15 an ounce at 1:42 p.m. in Singapore. Silver for immediate delivery fell to as low as $11.84 an ounce, the lowest since Aug. 31, 2007, before trading at $11.8475. The U.S. currency rose for the ninth day, adding 0.4 percent to $1.4075 against the euro at 1:39 p.m. in Singapore. It touched $1.4047 yesterday, the highest since Oct. 9, 2007.
``At the moment we feel that gold is trading in a wide range between $840 and $775 and we feel it represents good pickings at either end of the spectrum,'' Barratt added. Crude oil in New York fell 1.1 percent to $105.16 a barrel at 1:40 p.m. in Singapore. Crude oil often gives direction to gold as investors buy bullion to hedge against rising inflation Morgan Stanley, the second-biggest U.S. securities firm, cut its price forecasts for gold and silver as pared inflation expectations and a stronger dollar trimmed investor demand.
Gold may average $900 an ounce in 2008 and $950 an ounce next year, down from previous forecasts of $950 and $1,000 respectively, the bank's analysts led by Hussein Allidina wrote in an e-mailed report yesterday. ``We retain a positive profile owing to gold's long-run fundamentals,'' Allidina wrote. ``Despite recent weakness and near-term headwinds, income growth is inevitable and will lead to acceleration in demand.''
