Singapore - Gold neared its highest level
in more than two weeks on Monday, but gains may be capped by a rally in equity
markets and promising US jobs data that dampened speculation the Federal
Reserve may boost monetary stimulus.
Bullion has slipped almost 12% so far this
year, having posted annual gains in the past 12 consecutive years as easy
monetary policy prompted investors to buy the precious metal to hedge against
inflation and economic uncertainties.
Gold rose $7.05 an ounce to $1 477.25 by
06:24 GMT due to a stronger euro. It hit a high of $1 487.80 on Friday, its
highest since April 15, on safe-haven buying spurred by a cut in interest rates
by the European Central Bank and the Fed's decision to stick to its stimulus
"The market is trying to test $1 487
and it has been tested twice. That might be the reason why the market is
pushing up. On the other hand we have a slight improvement in funds holding of
gold," said Joyce Liu, an investment analyst at Phillip Futures, referring
to a report from the Commodity Futures Trading Commission (CTFC).
"If you look at the technicals, gold
is still in an upward correction. For it to go into the bull territory, we at
least need to break $1 530. For me to confidently call it an upward trend, it
needs to break $1 590. We are quite some way off."
US gold for June delivery was at $1 476.90
an ounce, up $12.70.
Hedge funds and money managers increased
their bullish bets in gold futures and options in the week to April 30 as the
price of the precious metal rallied 4.5% during the period, a report by the
CFTC showed on Friday.
But daily outflows on exchange-traded funds
indicated investors were still jittery after gold's historic decline in
mid-April, when it plunged more than $200 over two days.
SPDR Gold Trust, the world's largest
gold-backed exchange-traded fund, said its holdings fell 0.34% to 1,065.61
tonnes on Friday - their lowest since September 2009.
Stocks rose in Asia on Monday as investors
gave the thumbs up to an upbeat US labour force report that sent Wall Street to
an all-time closing high last week, while the euro held steady against the
US employment rose at a faster pace than
expected in April and hiring was much stronger than previously thought in the
prior two months, denting speculation the Fed may boost monetary stimulus.
In the physical bullion market, purchases
were mostly driven by worries that prices could rise again, having recovered
more than $150 since hitting a 2-year trough in April.
But dealers also noted an increase in
demand from No.2 consumer China as Shanghai gold futures fetched premiums of
more than $10 an ounce to US futures or cash gold, making it cheaper to buy the
metal from the overseas market.
"There's a bit of buying after the
weekend. You can say supply in the physical market has yet to return to
normal," said a dealer in Hong Kong.
"There's short covering, but I think
there's some sort of hesitation whenever prices approach $1 500."
A surge in physical buying in Asia and
other parts of the world plucked gold prices from recent lows, leading to a
shortage of gold bars, coins and nuggets in Hong Kong, Singapore and Tokyo.