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Gold extends gains on softer dollar

Feb 16 2015 10:06

Singapore - Gold extended gains to a third session on Monday, bolstered by safe-haven bids amid a softer dollar and jitters ahead of negotiations regarding Greece's future in the eurozone.

Spot gold edged up 0.3% to $1 232.50 an ounce by 05:47, after gaining 0.6% in the previous session.

Traders were eyeing a meeting of eurozone finance ministers in Brussels later on Monday to find common ground with Greece's new government, elected on a pledge to scrap the austerity strictures of Greece's international bailouts.

READ: Eyes of the world on Greece this week

If the meeting produces no results, there is a concern that Greece will be headed for a credit crunch that would force it out of the eurozone.

"Concerns about Greece's negotiations with its lenders should continue to support a safe-haven bid for gold," said Victor Thianpiriya, an analyst with ANZ.

The metal also found support from a weaker dollar, which slid as data on Friday showed US consumer sentiment unexpectedly fell in February from an 11-year high.

A soft dollar makes gold cheaper for holders of other currencies.

However, sentiment towards gold remained bearish as the outlook for the dollar remained upbeat, as many investors continued to price in an interest rate hike by the US Federal Reserve some time this year.

Any hike by the Fed, which has kept rates near zero since 2008 to stimulate the US economy, could hurt demand for bullion, a non-interest-bearing asset.

Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.42% to 768.26 tonnes on Friday, while speculators cut bullish stances in gold futures and options for the second straight week during the week to February 10.

Chinese buying

Investors were also eyeing trade on the Shanghai Gold Exchange to gauge buying interest in the second biggest gold consumer before China goes on a week-long holiday for the Lunar New Year from Wednesday.

Gold jewellery and bars are popular for holiday gift-giving, and trading on the exchange is an indicator of demand levels.

Buying has been robust ahead of the holiday, though some traders warned that sales were still lower compared to last year.

"Physical demand out of China should keep the yellow metal trading $1 220 to $1 235 over the next two days before the Lunar New Year break," said MKS Group, a trading firm.

commodities  |  gold  |  markets
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