Spot gold edged lower on Thursday, taking a breather after hitting a
three-month high in the previous session, while sentiment remains
supported on hopes of further monetary easing after sluggish economic
data from the euro zone and China.
Data showed unexpectedly weak activity in the euro zone, while
China's manufacturing sector contracted for the fourth straight month,
fueling anticipations that central banks will further ease monetary
policy to promote economic growth.
Gold benefits from loose monetary policy, as abundant credit keeps
the opportunity cost of carrying gold low. In addition, higher inflation
outlook caused by a flood of cheap cash burnishes the appeal of gold,
traditionally seen as a good hedge against inflation.
"There is always a case to be made for gold, as long as the central
banks keep taking new easing measures or keep indicating they will take
more new measures down the road," said a Singapore-based trader.
He said that the weak numbers of out China added to the argument that more easing will be adopted by Beijing.
Spot gold edged down 0.1 percent to $1,773.89 an ounce by 0338 GMT, after three consecutive days of gains.
U.S. gold inched up 0.3 percent to $1,775.80 an ounce.
Technical signals were also supportive of gold's strength. Chart
analysis suggested that spot gold could extend gains to $1,797 an ounce
during the day, Reuters market analyst Wang Tao said.
Scrap selling was spotted from Thailand and Indonesia, while buying
from China and India remained muted, dealers in Hong Kong and Singapore
said.
Spot platinum hit a five-month high of $1,726.5 an ounce earlier in
the day, before retracing to $1,715.49 an ounce, down 0.3 percent from
the previous close.
Prices of the metal, mainly used in jewellery and automotive sectors,
rallied about 5 percent this week on chart strength and supply woes in
South Africa.
But technical analysis suggested that platinum might be running out of steam in the short run.
"Bullishness on breaking the 200-day moving average may prove
short-lived," said Tim Riddell, head of ANZ Global Markets Research,
Asia.
The breakthrough fuelled expectations that platinum could move
towards $1,790, the centre of the predominant trading range in the first
three quarters of 2011, but it may be just completing a broad cycle
from the December low below $1,340, he added.
"What it means is that the current bullish expectations about
breaking moving average needs to be tempered and any slippage below
$1,690 could trigger disappointment and a sharp retracement to
$1,570-$1,600 areas."
