A woman is reflected on a mirror inside a gold jewellery shop in the western Indian city of Ahmedabad November 29, 2010.
Gold fell on Monday,
under pressure from a stronger dollar, which gained after initial
optimism over the ability of Italy and Greece to tackle their debt
burdens gave way to caution.
Decent demand for Italian bonds
was not enough to provide the European equities market with relief,
while German Bund prices recovered from session lows.
Yields on the benchmark 10-year
Italian bond eased this week, having last week broken above the
7-percent “danger zone” that analysts widely believe makes the cost of
servicing Rome's debt burden unsustainable.
Gold priced in euros edged above
1,300 euros an ounce, nearing last week's one-month highs, while gold
priced in dollars was down 0.6 percent at $1,777.19 an ounce by 14:43 SA
time, under pressure from a 0.6 percent rise in the US currency.
“I get the feeling there is a
dribbling-in of money into gold,” Credit Agricole analyst Robin Bhar
said, adding that while the price was vulnerable to corrections,
ultimately, evidence seemed to point to ongoing demand for bullion.
“Speculative positioning is
probably winning out against everything else and if we can move from
where we are now, we may see a rally higher, then it probably is worth
going long, maybe through some portfolio diversification and ETF buying.
That all seems to be playing into it.”
The US
options market shows most investors are positioned for a rise in the
gold price to $2,000 an ounce or beyond by the end of this year.
US investment bank Goldman Sachs
said on Monday it was maintaining a long position in gold based on its
expectation for US interest rates to remain low for longer than
originally anticipated.
“We expect gold prices to continue
to climb in 2011 given the current low level of US real interest rates.
Further, with our US economics team now forecasting slower US economic
growth in 2011 and 2012, we expect US real interest rates to remain
lower for longer, supporting higher gold prices through 2012,” Goldman
Sachs said in a note.
NO SOLUTION YET
Although Italy and Greece have
embarked on a painful journey towards solving their debt problems, the
euro zone debt crisis is nowhere near an end, which could support
long-term gold prices.
“In the longer term there is still
a lot of uncertainty, such as the many challenges Italy faces as to how
the new government will implement harsh reforms,” said Ong Yi Ling, an
analyst at Phillip Futures. “The overall backdrop remains supportive of
safe haven demand in general.”
Highlighting
investor demand for gold in light of the uncertainty surrounding
Europe, flows of metal into bullion-backed exchange-traded funds staged
their largest weekly rise in more than two months last week.
Global holdings of gold in ETFs
increased by nearly 897,000 oz last week to 68.854 million ounces and
November is shaping up to show the largest monthly inflow since July,
with a net inflow of 947,000 so far this month.
Physical market activity in Asia
was muted, after last week's 2 percent rise in the price sidelined
buyers, dealers said. Premiums in Hong Kong and Singapore were little
changed from last week.
Platinum was the top performing
metal among the precious complex, with a 0.5 percent gain on the day
that took the price to $1,643.49 an ounce. So far this month, the
platinum price has risen by nearly 3 percent to near two-month highs.
Palladium reversed earlier gains
to fall 0.2 percent on the day to $653.85 an ounce, while silver fell
0.8 percent to $34.33 an ounce. - Reuters
