Gold remains steady after gaining on dollar fall
Gold was little changed on Monday after rising earlier as the dollar fell to its lowest this year on growing risk appetite, with investors becoming cautious about pushing prices above a key resistance level that has held for most of 2009.
A recent recovery in risk appetite on better-than-expected U.S. corporate earnings and data has prompted investors to pour funds into risk assets, including stocks and commodities, exposing these markets to a potential correction as liquidity is likely to drop during the summer holidays, some traders said.
For gold, a lack of imminent risks that could prompt investors to seek bullion as a safe haven and its failure so far to break above a key resistance point suggest prices have limited upside scope.
“Gold prices seem to be tracking the weakness of the dollar,” said David Moore, a commodities strategist at Commonwealth Bank of Australia, noting how gold extended gains earlier on Monday after rising sharply the previous session when the dollar slid broadly.
At the same time, underlying weakness in demand for jewellery fabrication and diminishing safe-haven demand for gold may be tempering demand for bullion and keeping prices in a broad range between $900-$1,000 which has held all this year, he said.
Spot gold inched down about 0.1 percent from New York to $953.10 per ounce at 0558 GMT.
The dollar hovered near its lowest point this year against a basket of currencies on Monday after higher oil prices, steady global stock markets and U.S. GDP data boosted investments in riskier assets.
U.S. gold futures for December delivery rose 0.02 percent to $956 on the COMEX division of the New York Mercantile Exchange.
“Gold may be exposed to the risk of coming down along with other assets which have been rising, as investors tend to close out long positions during the summer holidays,” said Wakako Harada, a senior trader at Mitsubishi Corp in Tokyo.
“Since there is no risk that investors feel they should avert right now, gold is likely to be dragged down with other markets. For much of this year, gold has not held above $955-$960, which has become a psychological resistance level,” she said.
Except for the two times in February and June when prices jumped to around $1,000, gold has been spurned at around $960 this year.
In other markets, the CRB commodity index posted a third week of gains, albeit increasingly mild ones, with the market now stuck between its year low in the first quarter and its peak in June, while Asian stocks were marginally higher on Monday after ending July with double-digit gains.
Noncommercial net long New York gold futures positions eased slightly to 172,771 lots in the week to July 28 from 173,302 lots the previous week, the weekly Commitments of Traders report by the Commodity Futures Trading Commission showed.
As the gold market remained rangebound, so did investment flows.
The world’s largest gold-backed exchange-traded fund, the SPDR Gold Trust, said holdings stood at 1,072.87 tonnes as of July 31, unchanged from the previous business day.
The world’s largest silver-backed exchange-traded fund, the iShares Silver Trust, however, said its silver holdings rose 61.21 tonnes, or 0.7 percent to a record 8,828.14 tonnes as of July 31.