Gold eases as risk appetite picks up

By Amanda Cooper

LONDON (BestGrowthStock) – Gold fell for a second day in Europe on Thursday, dented by a reemergence of risk appetite after data from the United States and Europe, although evidence of brisk physical demand helped contain the decline in price.

Strong U.S. service sector data on Thursday, along with a decline in weekly jobless claims helped dampen some of the wariness that has plagued the investment community, driving down volatility and pushing up equities.

Spot gold was at $1,217.10 an ounce by 1517 GMT, down from $1,224.30 an ounce late in New York on Wednesday and below this week’s peak of around $1,230 an ounce.

Fear that the euro zone debt crisis could undermine the tentative economic recovery in the region was a key driver behind gold’s rally to a record $1,248.95 an ounce in mid-May.

While some of that concern has been mitigated, it could take months for some of the austerity measures in the more debt-laded euro zone member states to take hold and this should continue to support the gold market.

“The issue about the euro zone and its financial troubles will be an underlying issue for a good few months to come … and it’s these macroeconomic factors that have driven gold for the past two years and I don’t see why they should stop being factors,” said Virtual Metals analyst Matthew Turner.

Investors have embraced gold as an alternative to stocks, bonds and even some currencies. The world’s largest gold-backed exchange-traded fund, SPDR Gold Trust (GLD.P: ), said its holdings hit a fresh record as of Wednesday, while the U.S. Mint said on Wednesday it sold its largest number of gold coins in May since January 1999.

“People talk about gold as a safe haven and of investors rushing into gold. If you look at the money spent, there can’t be that much investment compared to the stocks or the bond markets, so coin demand is illustrative of investment, not just by hedge funds but that it is becoming more widespread,” Turner said.

PAYROLLS AHEAD

Investors are awaiting key U.S. payrolls data on Friday, which is expected to show 513,000 jobs were added to the economy in May. This could potentially boost the dollar and further undermine bullion’s safe-haven appeal.

Weekly jobless claims data released Thursday showed the number of U.S. workers filing new claims for jobless benefits fell last week, while private employers added jobs in May, further evidence the labor market was improving.

U.S. gold futures for August delivery eased $4.10 an ounce to $1,218.40.

Underlying interest in gold is also intact, said Credit Agricole analyst Robin Bhar. “The retail appetite is definitely there… Maybe more dip demand as prices come back.”

SPDR Gold Trust said its holdings rose to a record at 1,268.539 tons as of June 2 from 1,268.234 tons in the previous business day.

In India, the world’s top physical gold market, some jewelers stocked up as bullion prices dropped from a two-week high, while selling from other consumers in Asia also slowed, keeping premiums for gold bars steady.

Silver was at $18.11 an ounce versus $18.45 an ounce.

“If risk appetite returns to financial markets in the coming months and we see a waning of investor appetite for the precious metals, we believe that silver will be more vulnerable to a price correction than gold,” analysts at RBS said in a note. Spot platinum was at $1,545.50 an ounce versus Wednesday’s $1,545 an ounce while spot palladium was at $450.98 an ounce versus $454.50.

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(Additional reporting by Humeyra Pamuk and Jan Harvey in London and Lewa Pardomuan in Singapore, Editing by Keiron Henderson)

Gold eases as risk appetite picks up