Gold slips on dollar rise; eyes rangebound trade

By Frank Tang

NEW YORK (BestGrowthStock) – Gold fell toward $1,100 an ounce Tuesday, snapping a three-session winning streak, as a dollar bounce against the euro and month-end squaring prompted traders to lessen positions.

Bullion has been in a $60 trading range in the past six weeks, indicating indecision among bullion investors because of a lack of traditional price drivers such as currency weakness or inflation.

“There is no big defining element in the market right now, as there is sufficient sovereign risk worries to keep the market depressed through a strong dollar,” said James Steel, chief commodities analyst at HSBC.

Gold is also on track to end the first quarter up less than 1 percent, the smallest quarterly gain since the end of 2008.

Spot gold was at $1,104 an ounce 2:43 p.m. EDT, compared with $1,108.20 quoted late in New York on Monday.

U.S. June gold futures settled down $5.80 at $1,105.70 an ounce.

A higher dollar due to positive U.S. consumer confidence data prompted profit-taking in gold. The inverse relationship between gold and the dollar appeared to reassert itself of late, following an apparent breakdown earlier in March.

Analysts, however, said chart patterns suggest the rangebound pattern will persist.

Adam Hewison, president of MarketClub.com, said that technical chart cycles indicate gold prices will be trapped in a broad range from $1,050 to $1,200 for the rest of the year.

“It’s just frustrating and not a very friendly market for trading. There is no reason in my mind to get excited about gold on the long side at this particular moment.”

Analysts watching TIPS or Treasury Inflation-Protected Securities said rising real interest rates were weighing on gold market sentiment.

Any rise in U.S. interest rates could dull the attraction of holding a non-interest rate bearing asset priced in dollars, such as gold.

“Real yields from TIPS have been increasing lately. Rising real yields increase the opportunity cost of holding gold, so this could exert downward pressure on the gold price,” said Eliane Tanner, commodities analyst at Credit Suisse.

WEAK PHYSICAL DEMAND

Asia-based traders said activity in the physical market was thin, but main consumer India was expected to resume purchases ahead of the wedding season in April.

Gold jewelry is the most common gift during religious events in India and local jewelers normally stock up weeks before key celebrations.

On the investment front, the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings stood at 1,129.823 tonnes as of March 29, up 5.176 tonnes from the previous business day. (GOL/SPDR: )

“Clearly, a pullback in prices tempted some retail investors to return to the market, which was also reflected in improved sales of gold coins,” VTB Capital said.

Silver and the platinum group metals retreated on Tuesday, after Monday’s sharp rally as signs of economic strength boosted metals with industrial properties.

Spot silver was at $17.31 per ounce from 17.32 late in New York on Monday, palladium was at $468, down from $471 an ounce and platinum at $1,619 from $1,620.50 late on Monday.

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(Additional reporting by Veronica Brown and Pratima Desai in London, Lewa Pardomuan in Singapore)

(Reporting by Frank Tang)

Gold slips on dollar rise; eyes rangebound trade