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Mon 8 Nov 2010 12:26 PM

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Gold hits record before slipping; dollar outlook eyed

Gold hits another record above $1,398 an ounce before a rebound in the dollar caused prices to retrace

Gold hits record before slipping; dollar outlook eyed
US gold futures for December delivery fell $8.4 an ounce to $1,389.3 an ounce. (Bloomberg Images)

Gold hit another record above $1,398 an ounce on Monday before a rebound in the dollar caused prices to retrace, though short-term sentiment remains upbeat.

Gold fell $5.45 an ounce to $1,389.05 by 0344 GMT, having risen as high as $1,398.35. Silver tracked gold higher to hit a fresh 30-year peak at $26.98 an ounce.

"What I would like to see would be the holdings in the ETF side. I would like to see it increase to really show that this rally in gold prices is sustainable," said Ong Yi Ling, investment analyst at Phillip Futures in Singapore.

"I think for today, we may actually see gold hit above $1,400 on an intraday basis. This is the level that I think a lot investors should be watching to see if some shorter-term players may choose to take profits."

The world's largest gold-backed exchange-traded fund, SPDR Gold Trust said its holdings slipped to 1,291.766 tonnes by November 5 from 1,292.189 on November 2. The holdings hit a record at 1,320.436 tonnes on June 29.

US gold futures for December delivery fell $8.4 an ounce to $1,389.3 an ounce.

In the physical sector, higher gold prices attracted selling but premiums for gold bars were steady in Singapore as bargain hunters resurfaced at lower levels.

"We've seen gold selling of scrap from Thailand and Indonesia but there's no change in the premiums at 40 to 70 cents, depending on the brands," said a physical dealer in Singapore.

Investors also expect the dollar to stay on a weaker trend on global economy concerns.

The dollar is trading at its weakest in nearly a year against a basket of major currencies.

The euro fell half a percent against the dollar on Monday, dropping through $1.4000 and triggering stop losses. The dollar had soared on Friday after data showed US employers added 151,000 jobs in October, blowing past expectations of a 60,000 rise.

The Nikkei average rose more than 1 percent to a three-month high on Monday, adding to gains made last week as risk money shifts towards global equities on improving prospects for the US economy.

The world's largest silver-backed exchange-traded fund, iShares Silver Trust, said its holdings rose to 10,195.71 tonnes by November 5 from 10,137.92 tonnes on November 2. The holdings hit a record at 10,224.05 tonnes on Oct. 15.

The market is also looking ahead to comments from a leadership summit of the group of 20 nations meeting in Seoul, South Korea, this week on currency exchange rates.

Writing in the Financial Times, World Bank president Robert Zoellick said leading economies should consider readopting a modified global gold standard to guide currency movements.

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