Gold treads water; euro zone worry, US data weigh

Gold held steady on Friday in listless trading as persistent concerns about the euro zone’s finances and disappointing U.S. economic data put off most investors.

By (Reuters)

Published: Fri 20 Apr 2012, 3:51 PM

Last updated: Tue 7 Apr 2015, 11:24 AM

Gold has fallen more than 1 percent so far this month, in tandem with equities and other commodities, after markets rallied in the first quarter on brighter global economic outlook and prospects of accommodative monetary policy.

Spot gold was little changed at $1,642.11 an ounce by 0707 GMT, on course for a 1-percent weekly fall.

U.S. gold inched up 0.1 percent to $1,643.20.

“Gold lacks its own momentum to move anywhere, and we are waiting for the next major U.S. data, or a major development in Europe,” said Peter Tse, director at ScotiaMocatta in Hong Kong.

Economists believe Spain and Italy will not need international bailouts as they battle through their debt crises, but investors remained worried, as evident from the rising yields of the bonds Spain auctioned on Thursday.

Tse said the presidential election in France, scheduled to kick off on Sunday and which a Socialist president is expected to win, could put pressure on the euro and trigger wild fluctuations in share prices.

In the United States, the number of people claiming unemployment benefit for the first time fell less than expected last week, suggesting a slowdown in job creation and casting doubts about the strength of the economic recovery.

Other data showed factory activity in the Mid-Atlantic region slowed sharply this month and U.S. home resales fell for a second month in March.

Investors are also closely watching the Federal Open Market Committee meeting next Tuesday and Wednesday during which the Fed is expected to adopt a wait-and-see approach towards easing monetary policy, although the sluggish economic data has kept up hopes for another round of quantitative easing.

Physical gold buying in Asia was sluggish, even as India approaches a key gold-buying festival early next week.

“After the strike by Indian jewellers, we saw some buying at the initial stage but there hasn’t been much follow-up ever since,” said Tse, adding that a price drop to below $1,600 could lure buyers back.

In Tokyo, investors’ interest in trading bullion was muted while industrial demand has picked up in the beginning of a new fiscal year, said an official at a large bullion house.

“Fundamentally, investment demand is a bit slow and industrial demand is better, but we don’t have much confidence that demand will further rise,” he said.

Spot silver traded nearly flat at $31.71, headed for a 0.9 percent weekly rise, its biggest one-week gain in nearly two months.

Silver fabrication demand should climb 3 to 5 percent this year as end-users replenish inventories that ran low late last year due to an economic slowdown, but prices are unlikely to test record highs as investor buying may remain subdued, said the head of Thomson Reuters GFMS.