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Gold prices likely to trade sideways

December 29, 2014

Singapore (Dec 29)  Gold rose the most in 2-1/2 weeks on Friday in thin post-Christmas trading, boosted by short-covering after China's central bank was reported to be considering a loosening of liquidity requirements at the country's banks.

Gold prices were buoyed throughout the day by news reports that China, the world's top consumer of gold, was considering a policy change to reinvigorate the economy by allowing banks to have more money available for lending and investment.

The possibility of easier lending in China, the top consumer of many raw materials, prompted investors to cover short positions in gold. Liquidity remained thin the day after the Christmas holiday as key markets such places as Australia, Hong Kong, Singapore and the UK were closed on Friday. New York trading was open.

Despite Friday's gains, investor sentiment toward the metal is unlikely to improve in the first few months of 2015, as markets expect the U.S. economy to show continued signs of strength that will lead the Federal Reserve to start increasing interest rates.

Outlook

We expect gold prices are likely to trade sideways on the back of US holiday season.

Source: MoneyControl

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