Gold prices steady in Asia with physical demand eyed
London (Nov 21) Gold nudged $1,200 an ounce after the Chinese central bank made a surprise policy move and announced it was cutting its benchmark lending and deposit rates and giving banks more freedom.
Spot gold moved $10 an ounce higher after the announcement, hitting $1,201.10 but retreated back to $1,193.44 an ounce shortly afterwards.
Earlier on Friday morning, gold fell as comments from European Central Bank chief Mario Draghi reignited speculation that the bank will inject more monetary stimulus into the euro zone economy, driving the euro lower against the dollar. .
Draghi said inflation expectations were dropping to levels he considered excessively low. Gold, which is priced in the dollar andtends to fall when the U.S. unit strengthens, surrendered early gains after his comments.
"There is some physical demand underneath the market. Every time we go towards the $1,185-1,180, there seems to be a bit of bargain hunting," MKS head of trading Afshin Nabavi said. "But gold can't really get its head above $1,200."
"Overall the dollar continues to be leading the way, therefore I have to say that despite the demand for physical, I would think that because of the weakness in the euro, we have a chance of testing the lows again."
A rally in the dollar earlier this month knocked gold to a 4-1/2 year low at $1,131.85 an ounce. Gold was on track for its third straight weekly gain on Friday, buoyed by short-covering and a pause in the dollar rally earlier this week, while traders also eyed central bank activity for cues.
Traders were also digesting news of central bank sales and purchases.
Ukraine slashed its gold reserves by more than a third in October, data from the International Monetary Fund showed, as the near-bankrupt country reels from fighting a pro-Russian separatist movement in the east.
Russia raised its gold holdings for a seventh straight month in the same period. In physical markets, buying in top consumer China remained steady with premiums ranging between $2 and $3, helping lend support to global prices.
Among other precious metals, silver was down 0.4 percent at $16.16 an ounce, while spot platinum was up 0.3 percent at $1,212 an ounce and spot palladium was up 0.8 percent at $774.25 an ounce.
Source: CNBC
