Gold was trading near its most in nigh a week on Monday, retaining sharp short-covering gains from the previous session, but the metal could be susceptible to toll given weak investor sentiment and a strong dollar.
FUNDAMENTALS Spot gold had relieved 0.2 percent to USD 1,192.25 an ounce as of 0046 GMT, largely retaining Friday’s 1.8 percent gain. The metal rose to a point of USD 1,199 on Friday, its highest since Dec. 22 and its predominant one day jump in 2-1/2 weeks. Bullion jumped on short shelter amid thin market conditions, raising questions about whether the income can hold.
Liquidity has been thin due to the Christmas and year-end holidays. Gold prices were also buoyed on Friday by news reports that China, the world’s top consumer of gold, was considering a policy change to reinvigorate the economy by allowing banks to have more money available for lending and investment. Bearish sentiment in the bullion market was evident in the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund.
The fund’s holdings fell 0.08 percent to 712.30 tonnes on Friday, a six-year low. [GOL/ ETF ] Flows in and out of the fund tend to influence gold rate due to the size of its holdings. Also aching gold is the strong outlook for the US dollar, reflecting a robust economy and the workableness of higher interest rates. The dollar index, which tracks the greenback’s value against a basket of currencies, was trading close to a nine-year peak hit last week.
A strong dollar makes gold more excessive for holders of other currencies and reduces its appeal as a hedge. Oil prices remain soft, hurting gold’s appeal as a hedge against dollar-led inflation. Traders will be looking at buying in top consumer China and US economic data for cues.
MARKET NEWS Asian stocks tip-toed complex on Monday, following fresh gains on Wall Street, while the euro wallowed near 28-month lows versus the dollar on nervousness ahead of a suffrage in the Greek parliament that could result in snap elections. [MKTS/GLOB] US stocks pushed higher on Friday, with the Dow and S&P 500 both closing at record highs, while oil and natural gas fell on worries of a supply glut and on mild US weather.