Gold steadies, seen trading in range in near term

LONDON - Gold steadied on Friday despite positive factors such as a weaker dollar and a rise in oil, and analysts said the market was looking for price triggers to break the current trading range.

By (Reuters)

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Published: Fri 11 Apr 2008, 6:40 PM

Last updated: Sun 5 Apr 2015, 11:37 AM

The catalyst could come from sharp changes in the currency and the energy markets or heavy buying form investment funds, betting on strong returns in the long term, they said.

Gold was quoted at $924.90/925.70 an ounce at 1020 GMT, against $925.90/926.70 in New York late on Thursday and a record high of $1,030.80 on March 17.

“We are trading in a range and there is no sign that we are going to break out of the current wide range in the near term,” said Wolfgang Wrzesniok-Rossbach, head of marketing at Heraeus, a German precious metals trading group.

“We have an all-time high in the oil price and a near record high in the euro-dollar, but gold is still $100 away from its own historic highs. Probably there are some more long positions waiting to be sold, once gold goes up again,” he added.

The euro moved back up towards record highs versus the dollar, as investors focussed on the European Central Bank’s inflation concerns that will likely prevent it from cutting interest rates for a while.

The ECB held rates at 4 percent as expected on Thursday, with President Jean-Claude Trichet balancing upside price risks with downside growth concerns.

A weaker dollar makes gold cheaper for holders of other currencies and often lifts bullion demand. The metal is also generally seen as a hedge against oil-led inflation.

Oil held around $110 a barrel, as a rebound in the dollar against the euro and Saudi Arabia’s comment that markets were well supplied led investors to reduce positions, but firm Chinese demand lent support.

“Traders have again been looking to the currencies for direction, but despite breaking above the short-term downtrend line, the metal continues to meet chart resistance,” said James Moore, analyst at TheBullionDesk.com.

“That suggests gold may look to spend some more time consolidating above $900 an ounce,” he said in a report.

Gold struggles

Gold struck a record high above $1,000 an ounce last month but has since struggled to sustain the uptrend, with a broad commodities pullback dragging the price down.

But the metal had potential to jump again, analysts said.

They said that as fears of inflation lingered, gold’s appeal as a hedge was likely to rise, while expectations of further rate cuts in the United States also made the metal an attractive choice for investors seeking an alternative asset.

Precious metals consultancy GFMS Ltd said this week the factors supporting prices over the last few months, such as the credit market crisis, would remain in place and investors would continue to look at bullion for strong returns.

In other markets, US gold futures for June delivery fell $3.1 an ounce to $928.70 an ounce.

Spot platinum fell to $2,005/2,015 an ounce from $2,024/2,032 in New York, silver was flat at $17.95/18.00 and palladium fell to $458/463 from $458.50/463.00.

“The nature and extent of the South African power shortages that brought (platinum) production to a halt for five days in January are unlikely to be resolved in the near term given the operational and capacity constraints,” Barclays Capital said.

“We forecast prices to average $2,100/oz in Q2 as platinum supplies are heavily dependent on South Africa and the delicate power supply situation as well as mine safety concerns leave mine output extremely susceptible to potential disruptions.”



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