SINGAPORE, May 15: Gold inched up on Wednesday after dropping for four straight sessions, as outflows from exchange-traded funds halted, but firm equities could lure away investors seeking better returns and keep a lid on bullion’s gains.
While gold has recovered around 8 percent from a two-year trough hit in April, its safe-haven appeal has been battered by record high U.S. Equities, signs of an improving U.S. Economy and fears of a slowdown in demand from top consumer India.
Gold was up 0.1 percent at $1,426.56 at 0530 GMT. Bullion has slumped more than 14 percent so far this year, after gaining for the past 12 consecutive years as easy monetary policy burnished its appeal as a hedge against inflation.
Holdings at SPDR Gold Trust, the largest gold-backed ETF, were unchanged at 33.8 million ounces on Monday after falling almost daily.
But the holdings were still within sight of their lowest since March 2009 that was hit after funds cut their exposure to bullion, whose historic fall in April took ardent gold investors and bulls by surprise.
‘I think what the market is concerned about is ETF outflows,’ said Dominic Schnider, an analyst at UBS Wealth Management. ‘I wouldn’t be surprised if we touch $1,405 an ounce in a short period of time. I would assume that it would help revive some physical demand,’ he said.
US gold futures for June rose slightly to $1,425.50 an ounce.
A rally in US stocks to fresh highs on Tuesday curbed investors’ interest in gold, while a slowdown in Indian demand for the precious metal also weighed.
Gold buying in India came to a halt as the central bank restricted imports after a surge in buying in April sent the trade deficit to $17.8 billion for the month, up more than 72 percent from March.
India’s gold and silver imports surged 138 percent on year in April as customers took advantage of lower prices, increasing pressure on the current account balance and limiting the space for monetary easing even though inflation slowed in the month.
The import curbs by India are, however, only having a small impact on spot gold prices, a dealer in Hong Kong said.
Premiums for gold bars in Hong Kong were at $3 to $4 an ounce, the dealer added, compared with $3 last week. Hong Kong is China’s main source for gold imports.
Gold hit a more than two-year low of $1,321.35 in April after a break below the key level of $1,500 ignited selling and Cyprus’ plan to sell excess gold reserves led to speculation that other indebted euro zone countries could follow suit.
Portugal will not replicate a deal that allowed Cyprus to sell its gold reserves under its bailout, Bank of Portugal Governor Carlos Costa said on Tuesday.
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