SINGAPORE, July 9: Gold extended a rebound to a second day on Tuesday after breaking through a key technical level and as China inflation data boosted its appeal as a hedge against rising prices in the world’s second-biggest buyer of the metal.
Bullion came under renewed pressure late last week as a strong U.S. Jobs report raised fears of an early end to the U.S. Federal Reserve’s bond buying stimulus which was seen as stoking inflation.
But it rose 1 percent on Monday after the dollar eased from three-year highs and on some bargain hunting.
Spot gold rose 1.2 percent on Tuesday to $1,250.86 an ounce by 0301 GMT. It may keep rising to $1,261 per ounce, according to Reuters technical analyst Wang Tao.
‘There was some resistance at around $1,245 – that’s the level we were at before the nonfarm payroll data came out. Since we broke through that resistance, gold is shooting up,’ said a trader in Hong Kong.
The trader also said China continued to show buying interest as prices were near three-year lows.
Comex gold rose about $15 to $1,249.40.
Bullion has fallen nearly 10 percent since Fed Chairman Ben Bernanke said last month the economy was recovering strongly enough for the U.S. Central bank’s $85 billion monthly bond-buying stimulus to be reduced as soon as later this year.
Gold for immediate delivery fell to $1,180.71 on June 28 to its lowest since August 2010.
CHINA INFLATION
Data on Tuesday showed that China’s annual consumer inflation accelerated more than expected in June as food costs soared.
Its central bank is seen keeping policy largely neutral in the near term to balance the need to keep the world’s second-largest economy on an even keel while warding off consumer inflation as well as possible property bubbles, analysts said.
But gold continues to be undermined by liquidation in the metal-backed exchange traded funds. SPDR Gold Trust, the world’s largest gold ETF, said its holdings fell 1.56 percent to 946.96 tonnes on Monday – the lowest since February 2009.
‘The unwound gold positions increase gold supply and put gold under downward pressure, which in turn triggers more liquidations. We expect the spiral of liquidation will extend to 2014,’ said Helen Lau, senior metals and mining analyst at UOB Kay Hian Research.
Lau expects gold prices to decline by 20 percent year-on-year to $1,332 in 2013, and another 10 percent in 2014.
Precious metals prices 0301 GMT
Metal Last Change Pct chg YTD pct chg Volume
Spot Gold 1250.86 14.97 +1.21 -25.30
Spot Silver 19.29 0.25 +1.31 -36.29
Spot Platinum 1367.75 9.75 +0.72 -10.90
Spot Palladium 698.25 3.25 +0.47 0.90
COMEX GOLD AUG3 1249.40 14.50 +1.17 -25.44 20823
COMEX SILVER SEP3 19.29 0.25 +1.32 -36.35 4430
Euro/Dollar 1.2851
Dollar/Yen 101.10
COMEX gold and silver contracts show the most active months
(agencies)
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