Gold hits two-week peak in Asia, eyes dollar

Spot gold hit a two-week peak of $412.75 an ounce in Asia on Thursday, extending gains in New York after US Federal Reserve Chairman Alan Greenspan showed little concern about the dollar's fall.
Gold's fortunes have been firmly tied up with those of the US dollar and it was the currency's decline to a lifetime low against the euro on January 6 that propelled the precious metal to a 15-year peak of $430.50 an ounce.
"It's the same old story, unfortunately. The gold price is largely driven by dollar movement," said Martin Mayne, associate director at N M Rothschild in Sydney.
"I think $415 is the next important level on the upside, and I think that will be tested if we see the euro back up towards the 1.29 high we saw in January," he said.
Spot gold was trading at $412.50/413.25 an ounce, versus $411.25/412.00 last quoted in New York and London's on Wednesday afternoon fix of $405.75.
Other precious metals mirrored gold's rise. Silver fetched $6.55/6.57, versus $6.53/6.55 last quoted in New York.
Platinum rose to $847/852 an ounce versus $845/850 and palladium stood at $237/242 an ounce against $235/240 last quoted in New York.
Greenspan, in his semi-annual report on monetary policy to the US House of Representatives Financial Services Committee, said the dollar's decline should help narrow the ballooning US current account gap.
He also dismissed concerns about the dollar's fall, saying the inflationary impact of the dollar's slide had been minimal so far.
The dollar was at 105.30 yen while the euro was at $1.2834 in afternoon trade.
Japanese players returned to the market after a one-day holiday, pushing up prices in Tokyo gold futures.
The benchmark December 2004 gold contract on the Tokyo Commodity Exchange (TOCOM) rose 15 yen per gram to 1,398 yen.
Precious metals analysts saw more volatility in the bullion market.
They said gold could extend its Bull Run and push to a new 15-year high because liquidation over the past month was just a correction.
Once the $415 resistance level was broken, gold could rise to $430 and move forward to a 16-year peak of $450.
But a break below the crucial $395 support could drag down prices to as low as $375, a level last seen in October, because analysts also expected a sell-off at around $415.