Gold edges higher on EU debt, inflation concerns

14:04, April 08, 2011      

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Gold futures on the COMEX Division of the New York Mercantile Exchange on Thursday inched up amid concerns over European debt problem and global inflation. However, an interest-rate hike in the euro zone and a higher dollar curbed the rise.

The most active gold contract for June delivery increased 80 U. S. cents, or 0.05 percent, to 1,459.3 dollars per ounce.

Market analysts said the gold market got support from deepened concerns over debt problem in the Europe, as Portugal is set to seek a bailout from the European Union after the nation's political crisis pushed borrowing costs to record levels and forced it to become the third country in the euro region in need of a rescue.

Besides, investors are more worried over the worldwide inflation after the crude oil price hiked 1.47 dollars, to stand above 110 dollars per barrel in New York.

The precious market was also propped up by the news that an earthquake hit Japan's devastated northeast coast on Thursday, but the boost was temporary as no major casualties or damage were reported.

However, the hike in gold price was limited by interest rate rise in the euro region. The European Central Bank raised rates on Thursday for the first time since 2008, in a widely anticipated move that many analysts believed was already factored into the price of gold.

Before that, China also raised rates for the fourth time since October to combat rising consumer prices, and Federal Reserve Chairman Ben Bernanke this week said inflation must be watched " extremely closely."

Rising interest rates not only increase the opportunity cost of holding non-interest-bearing commodities such as gold, but could also cool down the economic growth and thus, dampen demands.

The strength in dollar also weighed on the gold market. The dollar index, which compares the greenback to a basket of six currencies, advanced to 75.648 from 75.535 late Wednesday.

Silver for May delivery increased 16.5 U.S. cents, or 0.4 percent, to 39.552 dollars per ounce. But July Platinum declined 7. 2 dollar, or 0.4 percent, to 1,790.6 dollars.

Source: Xinhua
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