Our dollar, gold rise as greenback slides

GOLD prices and the Aussie dollar are at their highest marks since September, boosted by a sliding US dollar.

Spot gold hit $US1343.61 a fine ounce in the local session yesterday, while the Aussie dollar climbed above US79c.

National Australia Bank global co-head of foreign exchange strategy Ray Attrill said the rise in gold was attributable to the US dollar weakness that had seen the greenback drop to a three-year low against the euro. The Aussie dollar is also higher against the yen but has fallen against the euro.

“Historically, we tend to see commodity prices and the US dollar move in opposite directions, irrespective of global growth, simply because when the US dollar is weaker I can afford to buy more commodities with my euros or my yen,” Mr Attrill said.

But the US dollar weakness was more perplexing, he said.

The strengthening of the US economy and the passage of key tax reform measures would traditionally be supportive of the US dollar, pushing short-term US interest rates higher and weakening currencies such as the Aussie.

But the Australian dollar also hit a four-month high yesterday, building on last week’s better-than-expected local retail data and optimism on the acceleration of the Chinese economy.

“The commodity price run is about ever-rising optimism on the synchronised global growth story, which has gath- ered fresh momentum either side of new year, really,” Mr Attrill said.

“Why the dollar is weak is the most perplexing thing ... to some extent it’s what’s happening in the rest of the world and the view that other central banks may not be too far behind the US in raising rates.”

IG Markets chief market strategist Chris Weston said there was an outflow of capital from the US into emerging markets.

He rejected suggestions gold was sought because of risks building in the financial system or rising inflation outlooks.

“Gold is simply moving higher because right now the US dollar is the worst house on an ever more attractive street,” Mr Weston said.

Several top-shelf financial indicators out this week — including December jobs figures, the ANZ-Roy Morgan consumer confidence and November’s housing and lending finance numbers — are likely to steer both the Australian dollar and markets this week. AAP