SINGAPORE, Mar 1: Gold traded little changed on Friday and was headed for a third straight week of loss, as a strong dollar and waning investor interest weighed on sentiment, although physical buying from Asia lent some support.
The dollar index hovered near a six-month high hit in the previous session as risk appetite was hurt by political uncertainty in Italy and U.S. Government spending cuts due to kick in later in the day. The U.S. Dollar attracted safe-haven inflows, but that weighed on dollar-priced commodities.
Buying from China helped support prices, as the popular gold forward contract traded on the Shanghai Gold Exchange was running about $20 an ounce higher than the international market.
‘Prices firmed up a little after the Shanghai market opened,’ said Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong, adding that though physical buying has been flowing in, investment interest in gold has been on the wane.
‘We don’t see much interest from funds and other investors, who are attracted to the stock market right now, as they are generally more confident in the economy.’
Even a weaker-than-expected revised U.S. Growth number for the fourth quarter failed to rekindle the passion for gold, and investors continued to liquidate their shares in the exchange-traded gold funds.
Holdings of the SPDR Gold Trust, the world’s top gold ETF, dropped to a nearly seven-month low of 1,254.49 tonnes on Feb. 28 in its eighth straight session of decline, finishing February with a record monthly outflow of 73.606 tonnes.
Spot gold was little changed at $1,580.25 an ounce by 0326 GMT, after finishing February down 5 percent in a fifth consecutive month of declines, its longest stretch of monthly losses in 16 years.
U.S. Gold inched up 0.1 percent to $1,579.90.
Investors are focusing on $85 billion of spending cuts due to kick in on Friday in the United States, absent a highly unlikely last-minute deal among lawmakers.
Though some analysts said a looming fiscal crisis in the world’s top economy would help gold regain some favour, as it would argue for prolonged monetary support that has been a key driver behind gold’s rally in recent years, others believed the near-term support would be minimal.
‘The $85 billion in spending cuts is simply too small to make much of a difference to the economy and although it could cause some problems, it will have no bearing on influencing investor allocations among different asset classes,’ said Ed Meir, an analyst at INTL FCStone, in a note.
The aftermath of Italy’s inconclusive elections remained a concern to investors, as political instability in the euro zone’s third-largest economy threatens to reignite the region’s debt crisis. Euro zone finance ministers will discuss the situation next Monday.
(AGENCIES)
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