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Friday, December 4, 2009

Gold price slumps as dollar strengthens

The gold price has slumped after surprisingly good US unemployment data sent the US dollar higher, making gold a less attractive investment.

Gold fell more than $76, or 6%, to $1,150 an ounce, down from a record high of $1,226.56 in early trading.

After figures showed the US jobless rate falling, the dollar gained 2% on the Japanese yen and 1.3% on the euro.

Gold has hit a number of record highs in recent weeks as the dollar weakened due to low interest rates in the US.

Teeth kicking'

Both the dollar and gold are seen as safe investments, but investors have preferred gold in recent months due to the weak dollar.

The US has said it will maintain low interest rates for some time, which makes the dollar less attractive.

But the sudden strengthening of the dollar has now sent the gold price sharply lower.

The dollar rose on the back of data which showed that the US unemployment rate fell in November to 10%, down from 10.2% in October.

In all, 11,000 jobs went over the month - the smallest number since the recession began in December 2007. That was far fewer than the 130,000 expected by most analysts.

The dollar rose against the euro, to $1.4889, and against the yen, to 90 yen.

"So many people have piled into gold, so this pop in the dollar is freaking people out," said Matt Zeman at LaSalle Futures Group.

"The dollar is rocking and gold is getting its teeth kicked in."

courtesy : BBC  NEWS