Gold flat despite euro gains; lacks demand

By Frank Tang

NEW YORK (BestGrowthStock) – Gold finished flat on Monday, retreating from a four-month high despite a euro rally against the dollar, as weaker physical demand for the precious metal limited gains.

Bullion’s failure to rise further in spite of Wall Street’s gains and a sharply lower dollar indicated that the negative correlation between the metal and the U.S. currency has lessened.

Miguel Perez-Santalla, vice president of sales at Heraeus Precious Metals Management, said gold prices, which have been supported by investment demand, looked “toppish.”

“We could be due for a short term correction right now, as actual physical consumption is way off. Even though people are talking about the economy doing so much better, we are not seeing it here.”

Spot gold was at $1,158.50 an ounce at 1:54 p.m. EDT (1754 GMT), against $1,159.00 late in New York on Friday.

The metal hit a four-month peak at $1,168.70 an ounce during the session, but eased as the euro retreated from highs amid fears its rise may have been overdone.

U.S. gold futures for June delivery on the COMEX division of the NYMEX settled at $1,162.20 an ounce, up 30 cents.

The euro had climbed to a one-month high against the dollar during the session, as euro zone finance ministers agreed on a 30 billion euro ($40.5 billion) rescue package for Greece.

Bullion was pressured by lingering uncertainties about sovereign credit, especially in smaller euro zone economies, and doubts that Greece’s fiscal situation will improve.

“In the futures market at least there is some doubt over how far this rally can extend,” said Standard Bank analyst Walter de Wet. “Looking at what is happening in the options market, people at least for now seem unwilling to buy upside.”

Spot gold typically benefits from dollar weakness, which lifts gold’s appeal as an alternative investment and makes dollar-priced assets cheaper for holders of other currencies.

“The announcement of a deal reached to aid Greece over the weekend will likely support risk appetite in the short term, which means that the USD may come under pressure and the EUR rebound,” said BNP Paribas analyst Anne-Laure Tremblay.

“Though the short-term correlation between gold and the EURUSD has lessened since January, it remains a significant factor in shaping the gold price. Hence a short term rebound in EURUSD will be bullish for gold over the next days.”

GOLD HOLDING HITS RECORD

Investment interest in gold was strong, with holdings of the world’s largest gold-backed exchange-traded fund, New York’s SPDR Gold Trust, rising to a record 1,141.041 tonnes on Friday. (GOL/SPDR: )

Data from the Commodity Futures Trading Commission’s Commitment of Traders report (COTR) on Friday also showed a sharp rise in net long positions, or commitments to buy, in the week to April 6.

“The latest COTR figures… show how widespread the return of investor and speculative interest to the gold market has been,” said UBS analyst Edel Tully in a note.

Goldman Sachs meanwhile cut its 2010 gold forecast on Monday, citing a rise in real interest rates, but said it still sees the metal at record highs next year.

Industrial precious metals platinum and palladium rose, with platinum hitting its highest since August 2008 at $1,736.50 an ounce and was last at $1,728 an ounce versus $1,712. Palladium peaking at a two-year high of $522.50, and was later at $518 against $510.

Silver hit its highest since January 20 at $18.58 and was last at $18.29 an ounce against $18.35.

Close Change Pct 2009 YTD

Chg Close % Chg US gold 1162.20 0.3 0.0 1096.20 6.0 US silver 18.414 0.063 0.3 16.845 9.3 US platinum 1739.40 12.00 0.7 1471.00 18.2 US palladium 524.15 10.55 2.1 408.85 28.2

Prices at 2:14 p.m. EDT (1814 GMT) Gold 1155.75 -3.25 -0.3 1096.35 5.4 Silver 18.21 -0.14 -0.8 16.84 8.1 Platinum 1724.00 12.00 0.7 1465.50 17.6 Palladium 516.00 6.000 1.2 405.50 27.3

Gold Fix 1158.75 -4.75 -0.4 1104 5.0 Silver Fix 18.49 15.00 0.8 16.99 8.8 Platinum Fix 1728.00 3.00 0.2 1466 17.9 Palladium Fix 515.00 0.00 0.0 402 28.1

(Additional reporting by Jan Harvey in London; Editing by David Gregorio)

Gold flat despite euro gains; lacks demand