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Gold Steadying On Physical, Safe-Haven Demand

September 16, 2014

New York (Sept 16)  The combination of improved physical demand in Asia combined with safe-haven buying are helping gold continue to steady after last week’s weakness, with the U.S. gold futures modestly higher so far Tuesday for the second day in a row.

Around 7:50 a.m. EDT, gold for December delivery was $2.40, or 0.2%, higher at $1,237.50 an ounce on the Comex division of the New York Mercantile Exchange. Spot metal was up $4.60 to $1,236.85 an ounce. December silver was up 9.5 cents, or 0.5%, to $18.715.

The London a.m. gold fixing was $1,238.75, up from the Monday afternoon fixing of $1,234.25.

“We saw a lot of interest in buying, particularly from Asia,” said Bernard Sin, global head of metals trading with MKS (Switzerland) SA. “We see physical demand. It should support the market for now.”

He said gold premiums rose, an indication of good physical demand. This buying came from China, Thailand, Malyasia and Singapore, he added.

Additionally, some safe-haven demand appeared to emerge ahead of a two-day meeting of the U.S. Federal Open Market Committee, he said. A number of global equity markets are on the defensive amid expectations U.S. policymakers could be construed as more hawkish in their post-meeting communique, particularly as the bond-buying program known as quantitative easing winds down.

The December S&P 500 futures were down 2.60 points to 1,973.50.

“I think there’s a bit of a risk-off moment taking place,” said Nicholas Brooks, head of research with ETF Securities. He also cited rallies in other markets such as U.S. Treasurys, Swiss franc and the Japanese yen.

“That would indicate that investors are moving into what they view as safe-haven assets,” Brooks said. “There are a number of factors. No. 1, the Fed is going into its meeting and there is a lot of uncertainty about where they are going to indicate that policy is going.”

Brooks also cited what appears to be a “soft spot” in global economic growth, particularly after weaker economic data out of China lately. And, he continued, geopolitical concerns surrounding Ukraine and Russia remain a worry, with the Russian ruble hitting new lows after tightening Western sanctions against the country

“So I think there are a number of global factors driving investors into safe-haven mode, and gold is a key beneficiary of that,” Brooks said.

Meanwhile, the euro was up to $1.29463 from $1.29407 in late-Monday North American trading. A weaker U.S. currency often attracts investment buying of gold as a hedge.

The main U.S. economic report on the calendar for Tuesday is the August producer price index at 8:30 a.m. EDT. Consensus expectations compiled by various news organizations call for the headline number to be flat and core PPI, excluding food and energy, to be up 0.1%.

Source: KitcoNews

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