Weak dollar lifts gold

The US dollar is underperforming against most of its major peers on Thursday, as investors are taking profits on recent rallies as a result of expectations that the US Federal Reserve will taper its bond purchase program soon.

This $85 billion a month program had a weakening effect on the dollar, so any plans to cut back on this type of stimulus will make dollar more favourable again.

However, the dollar has been declining in the past two days, especially against the yen, falling below the key 101 yen level today, moving further away from recent 3-1/2 year highs above 103 yen.

Such weakness in the dollar has helped lift gold prices since the two assets tend to have an inverse price relationship.

Gold futures broke above the key psychological level of $1,400-level as the dollar index, which measures the performance of the USD against a basket of six other major currencies, declined 0.2 percent to trade at 83.46, the weakest level since May 14.

NYMEX gold futures for August delivery traded at $1,410.25 a troy ounce during early European trading, the strongest level since May 22.

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