Gold price eases from 3-mth high on profit-taking, dollar gains

Singapore (May 19)  Gold slipped after a five-day rally on Tuesday on profit-taking and as the dollar regained some ground, with investors looking to the Greek debt crisis for trading cues, as well as the upcoming minutes from the latest Federal Reserve meeting.

Spot gold had dipped 0.4 percent to $1,220.93 an ounce by 0640 GMT, off a three-month high of $1,232.20 reached in the previous session.

The metal had gained for five straight days to Monday after recent data on U.S. jobs, retail sales and consumer sentiment pointed to weakness in the economy and stoked speculation the Fed would not raise rates any time soon.

A drop in holdings of SPDR Gold Trust, the world's largest
gold-backed exchange-traded fund, to a four-month low of 718.24
tonnes on Monday, also undermined sentiment.  
    "There is some profit-taking going on after we failed to
hold near $1,230 and with the dollar gaining overnight," said a
trader in Singapore.
    The dollar climbed over 1 percent against a basket of major
currencies on Monday on higher U.S. yields and weakness in the
euro.   
    The turning point for prices could come on Wednesday with
the release of the minutes of the Fed's last policy meet in
April, the trader said.
    Markets are closely watching the minutes to gauge central
bank officials' thinking on when U.S. interest rates could go
higher.
    The recent weak data has bolstered views the economy was not
recovering strongly enough for the U.S. central bank to raise
rates from record lows at its next policy meeting in June.
    That view has supported non-interest-paying bullion, which
would have seen demand decline with higher rates.
    But Chicago Fed President Charles Evans noted on Monday that
the central bank could look at a rate hike in June if the
economy was strong enough.
    Potentially adding to arguments for raising interest rates
sooner rather than later was a paper published on Monday by the
San Francisco Fed that said the U.S. economy was probably not as
weak as current estimates suggest.   
    Also on the radar was the Greek debt crisis. Greece is near
a cash-for-reforms deal with its euro zone partners and the
International Monetary Fund that would help it meet debt
repayments next month, the country's finance minister said on
Monday, as worries persist over a possible bankruptcy.
 
A default, which could potentially result in Greece exiting
the euro zone, could boost safe-have demand for gold.

Source: Reuters