Gold higher on listless dollar

By Rujun Shen

SINGAPORE (BestGrowthStock) – Spot gold breached above the key $1,400 level for the first time in a week, riding on dollar weakness and buoyed by buying interest from China, but trading volumes remained thin ahead of the year end.

Investors are watching the Federal Reserve meeting later today, as well as for signals on monetary policy moves in China, to gauge the health of the world’s top two economies.

Spot gold rose to a one-week high of $1,405.85 an ounce, before easing to $1,403.66 by 0707 GMT, up 0.8 percent from the previous close.

U.S. gold futures gained half a percent to $1,404.7 an ounce.

“Gold is following up momentum with the selling in dollar toward the year end,” said a Singapore-based trader. “We are resuming the uptrend, and there are not many down days to be expected.”

The dollar remained weak after slumping on Monday as U.S. deficit concerns resurfaced, while the euro hovered near three-week highs against the dollar.

Traders cited buying from Chinese banks behind the strength in the bullion, but said the volume was very light as most funds and traders choose to avoid risks toward the year end.

“Many fund managers are already enjoying the sunshine. Between now and the end of the year fund activities will diminish,” said Ronald Leung, a physical dealer at Lee Cheong Gold Dealers in Hong Kong.

Physical buying emerges at levels below $1,400, helping support prices, traders also said.

Spot gold is expected to rise to $1,417 per ounce, as a double-bottom has been confirmed, said Reuters market analyst Wang Tao.

Spot silver gained for a second straight session to a one-week high of $29.88.

Platinum also rose to a one-week high of $1,707.25, before easing to $1,703.99.

POLICY WATCH

Investors continue watching potential policy moves from major economies in the world.

The Federal Reserve policy board meets later Tuesday and is expected to reaffirm its quantitative easing policy even while acknowledging the better run of data recently, just before a European Union summit later this week.

In China, the central bank raised reserve ratio requirements for banks for the third time in a month last week but refrained from raising interest rates, a move seen to benefit commodities.

“Only if they really raised interest rates it would put real pressure on the market,” said Leung of Lee Cheong.

A Reuters poll showed that China is poised to raise interest rates before the end of this year, but will then increase them just twice more in 2011, relying instead on using lending controls.

But an official newspaper said on Tuesday that China will probably target about 7.5 trillion yuan ($1.1 trillion) in new loans next year, level with its 2010 target, an indication that policy could be slightly looser than expected.

(Reporting By Rujun Shen; Editing by Ed Lane)

Gold higher on listless dollar