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19 April 2024

Gold off seven-week high

By Agencies

Gold ticked lower on Monday after earlier rising to its highest in more than seven weeks as investors awaited the outcome of Greece's debt deal talks, but a slower-than-expected growth in the United States underpinned sentiment.

EU leaders, which will sign off on a permanent rescue fund for the euro zone on Monday, are expected to agree on a balanced budget rule in national legislation, but unresolved problems in Greece cast a shadow on the discussions.

Gold hit a high of $1,739 an ounce, its strongest since December 8, on safe-haven buying after data showed US fourth-quarter economic growth was weaker than expected though it grew at its fastest pace in 1-1/2 years.

By 0232 GMT, gold stood at $1,732.89 an ounce, down $4.31. Bullion, which struck a record around $1,920 last September on concerns about a worsening euro zone debt crisis, is on track for a more than 10 per cent gain this month.

"If the retreat-rally pattern seen in the past two quarters continues, gold could well rise to $1,780 an ounce by early March," said Nick Trevethan, a senior commodity strategist at ANZ in Singapore.

"Chinese physical activity was more or less absent last week. These prices may look high to Chinese buyers after gold jumped almost 5 per cent whilst they were away. We'll be watching physical flows to see whether China will chase the rally or sit back and see if the market comes back to them."

The spot deferred gold contract on the Shanghai Gold Exchange added 14.34 yuan a gram to 353.15 yuan as trading resumed after the Lunar New Year break.

US February gold was steady at $1,733.20 an ounce.

The euro hovered at six-week highs against the dollar on Monday, but trading was slow as investors awaited confirmation that Greece has secured a long-awaited debt deal that will help it avert a messy default.

Prime Minister Lucas Papademos sought backing on Sunday from leading Greek party leaders for painful and unpopular reforms that the near-bankrupt country must negotiate now that a long-awaited debt relief deal seems almost secured.

Gold, typically a safe-haven asset, has been tracking the fortunes of the euro and stocks, with speculators selling the metal for cash to cover losses in other markets, especially during this period of uncertainty in Europe.

Gold also got a boost from reports the world's biggest hedge fund, Bridgewater Associates, was bullish on bullion as a hedge against inflation as governments print more money to reduce debt.

"There's a small amount of buying from China, but there's also profit taking in the market. The price has gone up so much," said a dealer in Hong Kong.

"I think people are waiting for US data this week such as non-farm payrolls and employment rate. We have yet to find if Greece will able to solve its debt problems."

In the energy market, US crude oil steadied above $99 a barrel on Monday, supported by the shutdown of oil production in South Sudan and concerns that Opec member Iran could soon halt its exports.