Gold dips after 7-day rally but set for second weekly gain
Singapore (Mar 27) Gold eased on Friday as traders booked profits after a seven-day rally and as the dollar rebounded on strong U.S. data, but the metal still looked set to post its second straight weekly gain on expectations U.S. interest rates will stay low for longer.
Tensions in the Middle East after Saudi Arabia and its allies launched air strikes in Yemen provided some support to gold, typically seen as a safe-haven asset.
Spot gold eased 0.3 percent to $1,199.95 an ounce by 0755 GMT. The metal jumped on Thursday to $1,219.40 - its highest since March 2 - in a knee-jerk reaction to the attacks in Yemen. It later pared gains to close near $1,200.
"Gold is weakening because of profit-taking and a slightly
stronger dollar," said Ronald Leung, chief dealer at Lee Cheong
Gold Dealers in Hong Kong.
"I don't think traders would want to commit too much unless
things worsen in Yemen," said Leung. Prices could consolidate
around $1,200 in the near term, he said.
Gold tends to be an investor favourite when geopolitical
tensions rise and risk-appetites dip. However, its failure to
hold on to 3-1/2-week highs reached on Thursday made traders
cautious over the price outlook.
"Although the metal breached the 100 day moving average
(near $1,208) during the session, it failed to close above the
indicator, which may signal that this latest run is nearing an
end," said MKS Group trader James Gardiner.
Oil prices also gave up some overnight gains as markets
believed the threat of a disruption to world crude supplies from
the Saudi Arabia-led air strikes in Yemen was low.
WEEKLY GAIN
Despite bullion's losses on Friday, it was on track to
finish the week up around 1.5 percent after a seven-day rally,
its longest winning stretch since August 2012.
Bullion has been well-bid since the Federal Reserve sounded
cautious last week about the U.S. economy and the pace of an
interest rate hike, prompting the dollar to fall from multi-year
highs. An aggressive rate hike path could hurt demand for gold,
a non-interest paying asset.
The greenback got some boost on Friday after data showed the
number of Americans filing new claims for jobless benefits fell
more than expected last week.
Caution over bullion's price rally was evident as SPDR Gold
Trust, the world's largest gold-backed exchange-traded fund,
continued to see outflows. Holdings fell nearly 6 tonnes to
737.24 tonnes on Thursday, the lowest since January.
Physical demand across Asia slowed this week as the long
rally in prices discouraged buyers.
Source: Reuters
