Gold gains modestly on physical buying

Markets
Gold inched up yesterday on technical and physical buying interest in Asia, but prices continued to hover near a two-and-a-half-month low as brighter prospects for the United States economy and the dollar dimmed the metal’s appeal.

SINGAPORE — Gold inched up yesterday on technical and physical buying interest in Asia, but prices continued to hover near a two-and-a-half-month low as brighter prospects for the United States economy and the dollar dimmed the metal’s appeal.

Investors were waiting for a European Central Bank (ECB) meeting later in the day to see whether it will deliver a fresh round of policy stimulus, and its effect on the euro and the dollar.

Spot gold rose 0,3% to $1 272,56/oz by 3:34am. The metal fell to a low of $1 261,19 on Wednesday, its weakest since mid-June, before closing with a small gain.

“There is some technical buying after gold prices failed to retain losses below $1 265,” a precious metals trader in Hong Kong said.

“We can see some fresh buying interest in the $1 260-$1 270 range. Physical buying from Asia is also supporting.”

Gold, seen as an alternative investment during times of geopolitical and financial uncertainty, has gained about 5% this year amid tension in Ukraine and the Middle East.

But bullion investors continue to worry over strong US economic data and its effect on the dollar.

In recent days, a string of encouraging US economic data, along with a sell-off in the euro and the yen, has boosted the dollar.

A stronger greenback hurts dollar-denominated gold as it makes the metal more expensive for holders of other currencies.

SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund and a good measure of investor sentiment, said its holdings fell 2,69 tonnes to 790,51 tonnes on Wednesday.

US nonfarm payrolls data due on Friday will be closely watched for further clues about the economy and the outlook for the Federal Reserve’s monetary stimulus.

Yesterday, all eyes will be on the ECB policy meeting. The ECB is under strong pressure to tackle stubbornly low inflation at a time when the conflict in Ukraine threatens to destabilise the region’s fragile recovery.

The euro on Wednesday recovered modestly from one-year lows against the dollar, but traders said euro bears were just taking a breather ahead of the ECB meeting. Any further weakening of the euro would hurt gold.

“The ECB meeting is more likely to be gold-bearish than gold-bullish,” HSBC analysts said in a note.

“Gold is likely to be more influenced by US unemployment data due at the end of the week and the general direction of the dollar.”

Among other precious metals, platinum and palladium – used in car manufacturing – gained as US August car sales were the highest for that month in more than a decade.

– Reuters