Gold falls on profit taking, euro worries

By Frank Tang

NEW YORK (BestGrowthStock) – Gold prices fell on Tuesday, losing nearly 1 percent, as investors took profits following a price rally driven by a rising euro amid optimism about a rescue package for debt-laden Greece.

The metal had climbed to a four-month high at just below $1,170 an ounce on Monday as relief over the 30 billion euro ($40.81 billion) bailout plan for Greece sparked a rally in the common unit against the dollar. But gold finished flat as weaker physical demand limited gains.

“There is profit taking as the market is getting ahead of itself from news of the Greece bailout last week,” said George Gero, vice president of RBC Capital Markets Global Futures.

Gold had ended higher for a seventh consecutive session prior to Monday, Reuters data showed. The metal was also 3 percent higher last week.

Spot gold was at $1,152.80 an ounce at 2:56 p.m. EDT (1856 GMT), against $1,155.00 late in New York on Monday.

U.S. June gold futures settled down $8.80 at $1,153.40 an ounce on the COMEX division of the New York Mercantile Exchange.

Market sentiment took a toll after minutes from a mid-March Federal Reserve meeting showed the U.S. central bank discussed raising for a second time the discount rate, the interest rate charged on emergency loans to banks.

Saxo Bank Senior Manager Ole Hansen said that the gold market was being driven chiefly by currency moves, with uncertainty linked to a possible yuan revaluation by China also a background factor.

“There are a few worries creeping in about a correction, as we have had a good move, but it is healthy that we finally managed to break recent highs,” Hansen said.

Monday’s intraday high at $1,168.70 was the firmest since December 8.

The euro traded flat as investors worried about the fiscal health of Greece, with results from a Greek Treasury bill auction showing the market still required a high premium to hold Greek assets.

Concern over the fiscal health of peripheral euro zone economies like Greece has weighed heavily on the euro this year, knocking it more than 5 percent lower versus the dollar.

By the same token, gold priced in euros hit record highs recently as some European investors switched into hard assets.

Strength in the dollar curbs gold’s appeal as an alternative asset and makes commodities priced in the U.S. unit more expensive for holders of other currencies.

TECHNICALLY POISED FOR GAINS

From a technical perspective, gold is poised for further gains, analysts said, but may need to put in several sessions of consolidation before it tracks higher once again.

“Gold remains in overbought territory, with immediate support around $1,150 and then $1,142.50,” VTB Capital analyst Andrey Kryuchenkov said in a note. “We need to see a confirmed pullback below these levels to suggest a definite and much-needed correction.”

Among other precious metals, platinum prices retreated from the previous session’s 20-month high to trade at $1,712.50 an ounce, against $1,720 late in New York on Monday.

The world’s biggest producer of the white metal, Anglo Platinum (AMSJ.J: ), said it expects demand to improve this year and may raise production by around 200,000 ounces to meet that.

Palladium was at $524.50 an ounce, against $516.50, while silver was at $18.21 an ounce against $18.19.

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(Additional reporting by Jan Harvey and Rebekah Curtis in London; Editing by Walter Bagley)

Gold falls on profit taking, euro worries