Gold slips as stock markets recover
London (June 26) Gold eased towards $1,310 an ounce on Thursday, retreating from this week’s two-month high, as a firmer tone to equities suggested investors were switching back into assets with the potential to offer higher returns.
The precious metal rose as high as $1,325.90/oz earlier this week on concerns over escalating violence in Iraq, which drove up oil prices, and on uncertainty about the US Federal Reserve’s plans to taper monetary stimulus.
It has struggled to maintain gains, however, as higher prices curbed physical demand and investors stuck to the sidelines, awaiting a clearer picture for US monetary policy.
Spot gold was down 0.6% at $1,310.59/oz at 9.56am GMT, while US gold futures for August delivery were down $11/oz at $1,311.60.
"As monetary policy starts to normalise and the search for yield starts to move towards the typical alpha assets like equities, we’d expect to see gold suffer," Mitsubishi analyst Jonathan Butler said.
However, the metal remains most sensitive to US data releases.
"The economic situation is still pretty unclear," he added.
"The Fed has indicated a fairly dovish stance for now — they’re going to taper, but they won’t raise interest rates for another 12 months, as far as we can see. That has given gold a bit of a stay of execution."
Stock markets in Europe and Asia looked past military gains by Iraqi militants and poor first-quarter growth in the US on Thursday, with some investors raising their forecasts for a US economic bounce in coming months.
The prospect of the Fed keeping rates low for longer boosted interest in stocks, dealers said, though some investors remained on the sidelines ahead of a key measure of US inflation due later on Thursday.
The dollar index languished near one-month lows on Thursday, still held back by surprisingly weak US first-quarter gross domestic product data, which have bolstered expectations that monetary policy will remain loose. The US unit is a key driver of gold, which is priced in dollars.
Chinese gold imports drop in may
Gold demand in main consumer China remains lacklustre, dealers said, with higher prices curbing some buying.
China’s total gold imports from Hong Kong dropped 17% to 67.233-metric tonnes in May from 80.817-tonnes in April, according to data e-mailed to Reuters by the Hong Kong Census and Statistics Department.
Net gold inflows into China from Hong Kong slid to 52.606-tonnes in May from 67.040-tonnes in April, the data showed.
Analysts said a weak start to monsoon season in India could also point to a poor outlook for gold demand in the metal’s second-largest market.
"India’s gold demand is sensitive to the intensity and timing of the yearly monsoon, as a good monsoon generally means a good harvest and increased agricultural income," HSBC said in a note.
"The majority of Indian gold purchases are made (by people working) in the agricultural sector, and a good harvest typically raises income levels and translates into greater bullion demand."
Among other precious metals, silver was down 0.8% at $20.80/oz. The metal rallied to a three-month high of $21.14/oz this week, outperforming gold.
The gold/silver ratio, which measures the number of silver ounces needed to buy an ounce of gold, fell to its lowest since early March on Thursday at 62.86.
Spot platinum was down 0.1% at $1,463.20/oz, while spot palladium was flat at $829.70/oz.
Source: bdive.za
