Gold eases as dollar, equities recover

Markets
Gold ticked lower yesterday as strong United States economic data allayed the fear about a slowdown in the global economy and dimmed the metal’s safe-haven appeal, while supporting equities and the dollar.

SINGAPORE – Gold ticked lower yesterday as strong United States economic data allayed the fear about a slowdown in the global economy and dimmed the metal’s safe-haven appeal, while supporting equities and the dollar.

Spot gold had slipped $1 to $1 236,60/oz by 3:06am, easing for a third consecutive session. The metal, however, has gained nearly 4% in the past two weeks and hit a one-month high of $1 249,30 last Wednesday.

Japanese stocks led a rally in Asia yesterday, after solid US data and earnings calmed tumult in global financial markets, while the dollar also gained in strength against a basket of major currencies.

“Global equities look to have recovered from last week’s sell-off with strong gains being posted late in the week to put downward pressure on the precious metals,” MKS Group metals dealer Sam Laughlin said.

“We are expecting $1 250 to form a strong resistance to any move higher in gold, while $1 220 to $1 225 should support the yellow metal in the short term,” Laughlin said, adding that any further improvements to the global macro climate could see gold drop towards $1 200.

Markets took comfort from Friday’s US data that showed the Thomson Reuters/University of Michigan index of consumer sentiment unexpectedly rose in early October to its highest level since July 2007, while groundbreaking for new homes rose more than expected in September.

That data reassured investors, who had been worried about the global economy and its effect on US monetary policy, and a resurgent European debt crisis.

Gold, along with other safe-haven assets such as bonds and the Japanese yen, had benefited over the past two weeks as investors sought safety from riskier equities.

But the worry over the health of the global economy has not been completely removed and markets will still be closely watching economic data.

Hedge funds and money managers increased their bullish futures and option bets in gold in the week up to October 14 after eight consecutive weekly declines, the Commodity Futures Trading Commission said on Friday. SPDR Gold Trust, the world’s top bullion-backed exchange traded fund, has also been seen an uptick in investments.

Among other precious metals, platinum and palladium continued to recover from recent losses, gaining nearly 1% yesterday.

-Reuters