Gold poised for more gains

2011-07-19 11:21

Singapore - Gold held steady below its record high on Tuesday, on course for a 12th straight day of gains as growing sovereign debt worries on either side of the Atlantic continued to support sentiment.

Gold's safe haven appeal is likely to be extended as the eurozone's debt crisis is far from being solved, while the White House is pursuing a fallback plan with Congress to raise the US debt ceiling and avert a default that could plunge global financial markets into chaos.

Spot gold rose to as high as $1 606.70 an ounce, just a hair off the record high of $1 607.01 hit on Monday. It was trading at $1 605.16 in early morning trade.

US gold edged up 0.2% to $1 606.10.

"If we do see some progress in the debt ceiling talks, it could encourage profit-taking by short-term investors," said Ong Yi Ling, an analyst at Phillip Futures.

The markets were also closely monitoring developments in Europe, where governments and banks struggled to reconcile competing proposals for a second bailout of Greece on Monday, three days before leaders meet to prevent the crisis from spreading through the region.

For the longer term gold's outlook remained bright, targeting $1 650 to $1 700 by the end of the year, Ong added.

Gold was on course for a 12th session of gains, its longest winning stretch in at least four decades. But technical analysis suggested that gold could face a sharp correction once hitting a short-term target of $1 613, Reuters market analyst Wang Tao said.

Investment interest in bullion grew as prices pushed higher. Holdings in the SPDR Gold Trust, the world's biggest gold-backed exchange-traded fund, gained 1.1% to 1 249.352 tonnes by July 17, highest in six months.

On Asia's physical market, scrap sellers took advantage of record prices and buyers stood on the sidelines, dealers said.

"Buyers are hesitant and waiting for a correction to reenter the market," said a Singapore-based dealer, adding that premium for gold bars had halved from a week earlier to around 50 cents an ounce over London spot prices.

Spot silver was little changed at $40.54 an ounce, off Monday's high of $40.70 - its loftiest level since May 4. US silver gained 0.6% to $40.58.

The gold-silver ratio, used to measure how many ounces of silver can buy an ounce of gold, dropped to 39.58 on Monday, its lowest since May 10. It was hovering near the level on Tuesday.