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Gold firmer as dollar struggles, silver hits 6-mth high

Written by: Staff
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SINGAPORE, Dec 5 (Reuters) Gold rose in thin trade on Tuesday as the dollar hovered near a 20-month low against the euro, but the metal was still struggling to break stiff resistance at 0 an ounce.

Silver rose to its highest price in more than six months at .09 an ounce on increased fund and speculative buying after the metal broke above a key resistance level the previous day.

But charts suggested silver was overbought.

Spot gold hit an intraday high of 6.60 an ounce, higher than 5.40/646.40 late in New York on Monday. The metal rose to a 16-week high of 9.50 last Friday.

''There's nothing to talk about. (Buyers) seem to be reluctant to buy at this level,'' said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.

Dealers said 0 was proving a tough resistance level for the metal and jewellery makers seemed to be well-stocked ahead of Christmas.

''Gold really needs to penetrate the barrier in order to go higher,'' said a dealer in Hong Kong.

Silver rose as high as .09 an ounce, its highest since mid-May, having broken the previous six-month high of .05. The metal was last quoted in New York at .08/14.15.

''Silver's fundamentals look good and there's some investment buying. The next target will be . But I don't see purchases from jewellers because it's expensive,'' he said.

Silver's 14-day relative strength index (RSI) stood at 83.47 on Monday, up from 55.87 on Nov. 20. The market views an RSI of 30 or less as oversold and 70 or more as overbought.

Strong investor buying of silver, fuelled by a popular exchange-traded fund (ETF), is likely to take the price to an ounce in the next few months despite lower fabrication demand, precious metals consultant GFMS said last month.

Silver rallied to a 25-year high of .17 in May as speculators poured money into the market in anticipation that an ETF called iShares Silver Trust would boost demand and widen the market supply deficit.

A weak dollar has supported precious metals prices by making the dollar-denominated market cheaper in other currencies.

The euro was a touch lower at .3335 , though still near a 20-month high of .3370 traded on Monday. The dollar stayed near a four-month low of 114.97 yen reached last week.

In Japan, gold and silver yen-based futures inched down in slow trade as firmness in the yen curbed the appetites of local individual investors.

''There are few fresh incentives now, resulting in this mood of a market correction,'' said Satoshi Matsunaga, an analyst at Mitsui Bussan Futures Ltd.

Investors are taking their main cues from the currency market, he added.

''Retail investors could step up their selling if dollar/yen tests the 115 level again,'' he said.

A stronger yen against the dollar makes yen-denominated commodities cheaper in the dollar-billed export market, which normally leads to lower TOCOM prices.

The key October gold contract <0#JAU:> on the Tokyo Commodity Exchange fell 11 yen per gram to 2,422 yen (.99).

The key October silver contract <0#JSV:> dropped 1.4 yen per 10 grams to 520.1 yen. The contract had risen as high as 521.5 yen on Monday -- the strongest for a benchmark contract since Sept. 12, 1985.

Platinum rose to ,159/1,164 an ounce from ,154/1,159 late in New York. Palladium rose to 7/332 an ounce from 6/332.

(=115.39 yen) REUTERS CS DS1155

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