Gold firm above $800, investors drawn by weak dollar
LONDON (Reuters) - Gold held above $800 an ounce on Thursday, with investors enticed by the prospect of further dollar weakness as markets increase pressure for a U.S. Federal Reserve rate cut next month.
Trade was thin, however, with many players reluctant to take major bets due to the U.S. market closure for Thanksgiving Day and a national holiday in Japan on Friday.
Spot gold firmed to $802.90/803.60 per troy ounce by 11:06 a.m. EST from $799.80/800.50 late in New York on Wednesday.
The dollar hit a record low versus the euro, Swiss franc and a basket of major currencies as the market upped the ante on the Federal Reserve to deliver a interest rate cut next month.
A cut in U.S. borrowing costs is seen heaping downward pressure on the embattled dollar as it dents the currency's yield appeal, making gold cheaper for non-U.S. buyers.
Bullion's safe-haven properties were also highlighted by worries over economic growth stemming from the global credit market crisis.
"Even when good news comes out from the U.S., no-one really takes much notice of it -- a rate cut is like sticking a finger in a dam," Commerzbank precious metals trader Rory McVeigh said.
"The weaker dollar is still keeping prices high for now -- there's no sign of the euro dipping below the $1.48 level."
Technical charts indicated gold was moving away from oversold territory, back on track towards a 28-year high of $845.40 hit on November 7.
Oil prices also provided residual support for gold's role as a hedge against inflation. Crude prices held steady above $97 a barrel on Thursday, having stalled just stalled just shy of the $100 milestone on Wednesday.
BULLS KEEP FAITH
In other bullion markets, the benchmark October 2008 gold futures on the Tokyo Commodity Exchange rose 10 yen per gram, or 0.4 percent, to finish at 2,846 yen, after wavering between 2,814 yen and 2,852 yen.
The December COMEX gold futures contract was up $5 at $803.60 GCZ7 in electronic trade.
Analyst James Moore of TheBullionDesk.com said that while thinner market conditions could make for choppy price action, gold still had potential to close in once again on the recent peaks.
"Overall sentiment still remains bullish ... as more concerns about the subprime and credit sector are likely to draw investor safe-haven positioning, while the technical outlook remains positive," Moore said in a note to clients. Continued...
