Oil, gold rebound as dollar index weakens
London, September 29, 2011
Crude oil rebounded, erasing declines in Asian trading on Thursday, as the dollar weakened against major currencies, and bullion rose after declines in the past three weeks attracted buyers of physical gold.
Concern over European nations' approval for expanded powers in the euro zone's rescue fund and Greece's ability to qualify for its next aid package lingered in the market. Copper futures dropped more than 5 percent on mounting worries that Europe's debt problems will plunge the world economy into a second financial tailspin.
"There's expectation that there will be concrete measures to ring-fence the troubles in the eurozone," said Alvin Liew, a senior economist at UOB Research in Singapore. "A lot has been talked about but no agreement is in place."
Investors are eyeing the result of European Union and International Monetary Fund inspectors' visit to Greece to decide whether Athens has done enough to secure a new batch of funds while German Chancellor Angela Merkel worked to defuse a revolt within her government before a vote to enhance the powers of Europe's bailout fund on Thursday.
The worries sent financial markets lower in the previous session. The Dow Jones industrial average dropped 179.79 points, or 1.61 percent, to 11,010.90. The Standard & Poor's 500 Index lost 2.07 percent.
Gold jumped more than 1 percent on Thursday as jewellers rushed to buy after prices dropped early in the session, but declines in other markets could cap gains as uncertainty about a resolution of Europe's debt crisis stoked fears for global growth.
Spot gold added $18.09 an ounce to $1,622 by 0649 GMT, having fallen to a low around $1,582.80. It had dropped to a two-month low of $1,534.49 on Monday -- down from a record of about $1,920 an ounce in early September. The precious metal is headed for a decline of 11 percent this month, the biggest monthly drop since October 2008.
"The dollar is likely to strengthen on a broad scale, at least short term," said Dominic Schnider, an analyst at UBS Wealth Management in Singapore. "That's definitely going to be weighing on performance."
Brent rose as much as 0.4 percent to $104.26 a barrel and was trading at $103.89 by 0703 GMT, after earlier touching a trough at $102.35. It is poised for a monthly drop of 9 percent and a decline of about 7 percent this quarter. - Reuters