Gold off 3-month lows, eyes on stronger dollar

By Chikako Mogi

TOKYO (BestGrowthStock) – Gold prices moved away from near three-month lows on Friday but remained pressured, hurt by a rising dollar and waning risk appetite among investors.

The euro’s extended fall against the dollar to its lowest in more than six months helped lift the U.S. currency to a five-month high against a basket of key currencies on Friday.

The weakness in the single European currency prompted funds to further trim their long positions in gold, but Thursday’s drop in gold prices to their lowest level since November 3 was spurring buying from across Asia.

“Concerns about waning risk appetite and the euro’s slide are playing against gold, but at the same time lower prices are attracting physical buyers widely from Asia, particularly China,” said Koichiro Kamei, managing director at research firm Market Strategy Institute in Tokyo.

“The gold market is seen as the easiest in which to hunt for bargains as there’s a perception that tightening measures in China are primarily aimed at speculative buying in the real estate sector,” he said.

Reflecting healthy buying interest in China, premiums for gold bars in Asia were seen from 50 cents to as much as $1 to spot London prices, Kamei said. (GOLD/ASIA1: )

Demand is expected to remain strong ahead of China’s Lunar New Year next month, while seasonal demand picks up in India in February and March, lending support to the market, he said.

Spot gold fell 0.4 percent to $1,082.80 per ounce as of 0237 GMT, compared to New York’s notional close of $1,086.75. Spot gold hit a low of $1,073.75 on Thursday, the weakest since November 3.

At current levels, gold was set for a weekly drop of about 1 percent.

U.S. gold futures for April delivery inched down 0.1 percent to $1,083.70 per ounce, compared to $1,084.80 an ounce on the COMEX division of the NYMEX.

Gold fell to a near three-month low on Thursday, hit by a stronger dollar and uncertainty over how President Barack Obama’s proposal last week to limit risk taking by U.S. banks might impact gold trading. Obama renewed his calls for robust Wall Street reform in his annual State of the Union address on Wednesday.

The dollar rose broadly on Friday as investors remained anxious about the fiscal health of Greece and other small euro zone countries.

Gold market traders said they were watching whether bullion would diverge from the euro’s movement and focus more on the positive prospect of physical buying at current price levels.

Reflecting weak market sentiment, investment in gold has paused.

The world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings stood at 1,111.922 tonnes as of January 28, unchanged from the previous business day.

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(Editing by Michael Watson)

Gold off 3-month lows, eyes on stronger dollar