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Gold To Struggle Dollar

Gold price gains ground on struggling dollar

Gold rose in Europe on Tuesday as investors sold the dollar after data showing a record U.S. current account gap highlighted worries about the world's dominant economy, dealers said.

Spot gold had advanced to $406.25/407.00 an ounce by 1433 GMT, compared with $403.45/404.20 late in New York on Monday.

The second quarter U.S. current account deficit widened to $166.18 billion, compared with economists' forecasts for a deficit of $159.35 billion.

That underscored a heavy outflow of dollars as Americans continue to buy foreign goods faster than U.S. business can sell their goods and services overseas.

The data also sparked a rally in the euro to $1.2273 from around $1.2242 before the figures.

"Gold found some support this afternoon after the U.S. data disappointed and the euro strengthened," Alexander Zumpfe of Dresdner Kleinwort Wasserstein said.

"The metal is currently re-testing resistance at $406. I think a break would bring the $408 area in reach again," he added.

Worries about the U.S. economy and related doubts over whether the Federal Reserve would gradually raise interest rates have weighed on the dollar, making gold more affordable for non-U.S. investors.

Weak economic data could dampen hopes for at least one additional dollar-boosting rate rise at the Fed's November or December meetings.

UBS Investment Bank analyst John Reade said in a daily report that gold had begun to form a base after recent bouts of long liquidation.

"Barring any surprise rallies in the US dollar, the metal will probably not fall materially from these levels," he said adding that the bank was sticking with its one-month and three -month forecasts for gold at $395 and $420 respectively.