SINGAPORE, Apr 29 : Gold rose more than 1 percent on Monday and held near its highest in more than a week, as a rebound in prices from multi-year lows failed to damp investor appetite for the precious metal, causing a shortage in physical supply.
Recent bleak U.S. Growth data that raised hopes the Federal Reserve would keep its current pace of bond buying at $85 billion a month also supported gold, widely seen as a hedge against inflation.
U.S. Gold futures, which often provide trading cues to cash gold, hit a high of $1,472.20 an ounce. By 0553 GMT, prices stood at $1,468.90 an ounce, up $15.30. Spot gold rose $6.70 to $1,469.20 an ounce.
Both cash gold and futures sank to around $1,321 on April 16, their lowest in more than two years, after a drop below $1,500 sparked a sell-off that prompted investors to slash holdings of exchange-traded funds. They touched an 11-day peak above $1,484 on Friday.
‘I don’t think gold is out of the woods yet, but there’s room for upward correction. One of the reasons why gold has dropped so much was the strong signs of U.S. Economic recovery. Now, we don’t see much of it,’ said Joyce Liu, an investment analyst at Phillip Futures in Singapore.
‘But investors are still roiled by the very recent tumble. The question is how sustainable is this physical buying, because at the same time, we are still seeing funds flowing out of gold. Retail investors won’t be buying gold in hundreds of millions of dollars like the funds.’
Premiums for gold bars have jumped to multi-year highs in Asia because of strong demand from the physical market, which has led to a shortage in gold bars, coins, nuggets and other products.
Holdings on the largest gold-backed exchange-traded fund (ETF), New York’s SPDR Gold Trust, continue to fall, in a sign investors have yet to regain confidence in gold. The holdings are now at their lowest since September 2009.
In other markets, shares inched ahead while the dollar lost ground as investors counted on easy money from central banks in the euro zone and United States to offset the risk of further disappointment from global economic data.
The recent string of unsatisfactory data will strengthen the hand of the doves at the Fed and temper any talk of tapering back the bond buying programme. The policy-setting Federal Open Market Committee will announce its decision at 1815 GMT on Wednesday.
U.S. Gross domestic product expanded at a 2.5 percent annual rate in the first quarter, data showed on Friday, falling short of market expectations for 3.0 percent growth.
Gold rallied to an 11-month high in October last year after the Fed announced its third round of aggressive economic stimulus, raising fears the central bank’s money-printing to buy assets would stoke inflation.
‘Equally important in helping gold prices stay up over the short term, is the continued strong activity we are seeing in the physical markets,’ said Edward Meir, a metals analyst at futures brokerage INTL FCStone.
‘In other macro news, the growth situation here in the United States is generating concern and may provide further fodder for the gold bugs going forward, despite the fact that we did not see much in the way of any upside action on Friday when the first-quarter GDP numbers were released.’
Hedge funds and money managers trimmed their net longs in gold futures and options in the week to April 23 as investors reduced bullish bets, a report by the Commodity Futures Trading Commission showed on Friday. (AGENCIES)
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