Singapore - Gold reversed early losses on Friday, hitting fresh two-month highs
on strong buying from China and short covering after breaking through key
technical levels, pushing the metal to its biggest weekly gain in a month.
Gold dipped early in Asian hours after strong US data indicated the
Federal Reserve could soon start tapering its massive stimulus, but the
positive momentum from the last few days sidelined bears.
The metal has gained for the last seven sessions out of eight, spurring rare
inflows into the top gold exchange traded fund, although the longer-term trend
has been negative.
"These levels are largely technically driven. They are
unsustainable," said Mark
Keenan, cross-commodity research strategist at Societe Generale in Singapore.
"This does not change our underlying bearish forecast and we see this as a
"We will get fresh QE (quantitative easing) tapering indications in the next Fed meeting in
September. The tapering is likely going to start taking effect then and gold
will fall again," Keenan said, referring to quantitative easing, or
Spot gold hit a two-month high of $1 372.51 on Friday before paring some
gains to trade up 0.02% at $1 365.84 an ounce by 05:03. It has risen
about 4% this week.
Gold was supported by technical buying once prices crossed $1 350 on
Thursday, as well as some safe-haven buying on escalating tensions in Egypt.
Silver gained after jumping 5% to a near three-month high. Platinum
and palladium added to gains and were trading close to two-month highs.
Despite the recent gains, the metal is down nearly 20% this year on
US central bank would begin tapering its $85bn monthly bond
The Fed's next policy meeting is on September 17-18. The number of Americans
filing new claims for jobless benefits fell to a near six-year low last week
and consumer prices rose broadly in July, which could draw the Federal Reserve
closer to trimming its massive bond-buying program.
Holdings of SPDR Gold Trust, the world's largest gold-backed ETF, fell on
Thursday after some gains earlier in the week. Holdings are near four-year
gold futures rose 3% on Friday. Premiums
spot prices jumped $3 overnight to $24, indicating strong physical demand.