Gold up on weaker dollar, heading for third weekly gain
SINGAPORE (July 26) Gold edged higher on Friday, staying on track for its third consecutive weekly gain, helped by a weaker dollar and hope of a prolonged period of easy monetary policy.
Bullion has gained nearly 10% in three weeks — its biggest such winning streak in nearly two years — after the Federal Reserve assured financial markets it would only start phasing out its stimulus when it was sure the US economy was strong enough to stand on its own.
Spot gold had climbed 0.1% to $1,334.90 an ounce by 6.52am GMT, nearly $160 more than the three-year low hit on June 28.
"The mood towards gold has definitely changed in recent weeks as the market thinks most of the bad news is priced into gold already," ETF Securities’ head of Australia and New Zealand business, Danny Laidler, said.
"I wouldn’t say people are bullish gold but they are definitely less bearish," said Mr Laidler, adding that outflows from the firm’s gold-backed exchange traded fund (ETF) have slowed.
Gold has still lost a fifth of its value in 2013 as investors feared a strong recovery in the US might prompt the Fed to scale back its $85bn monthly bond purchases. Outflows from gold ETFs have also weighed on prices.
Holdings of SPDR Gold Trust, the world’s largest gold ETF, fell 0.3% to 927.36 tonnes on Thursday — their lowest in four years.
"The fundamentals for buying gold are still there — loose monetary policy, concerns over the Middle East and Europe, and (economic) data from the US and China not being as positive as expected," Mr Laidler said.
Chinese demand
Physical demand in China has been key to supporting gold prices in 2013 amid the exit from ETFs.
Data from the Shanghai Gold Exchange shows that physical deliveries have totalled 1,198.4 tonnes so far in 2013. The exchange delivered 1,140 tonnes in all of 2012.
China’s gold demand could hit a record 1,000 tonnes in 2013, the World Gold Council said on Thursday, which means it would overtake India as the world’s biggest bullion consumer.
India is seeing a slowdown in demand as the government tightens rules to curb gold imports and tame a record trade deficit. Premiums in India jumped to $20 an ounce over London spot prices on Thursday due to short supplies.
Premiums in other parts of Asia remained stable from last week.
