Gold Strengthens to $1,227.55/Ounce as Dollar Was Held Back by Low Inflation Prospects

Demand for the dollar decreased over the prior week as reflected by the Lebanese pound’s peg against the dollar that went from $/LP 1,513-1,514 with a mid-price of $/LP 1,513.5 to $/LP 1,510-1,514 with a mid-price of $/LP 1,512, this week. Foreign assets (excluding gold) at the Central Bank dropped a monthly 0.37% from $38.87B at end-October to $38.73B by end-November. Meanwhile, the dollarization rate of private sector deposits stood at 65.87% in September compared to 66.13% in December 2013.

Outlook for slow inflation in the U.S. led the dollar to decline against the Euro. The euro strengthened against the dollar by 0.47%, ending the week at €/$ 1.2428.

Demand for gold strengthened amidst weak inflation prospects in the US. The price of gold went up from $1,205.32/ounce last Thursday to $1,227.55/ounce this week.

By Friday December 12th, 2014, 12:30 pm Beirut time, the dollar-pegged LP depreciated against the euro going from €/LP 1,864.78, the prior week, to €/LP 1,873.52. The Nominal effective exchange Rate (NEER) gained 0.56%, weekly, to 145.49 points, where its year-to-date gain reached 12.73%.

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