Physical Buying Steadies Gold

China's move to further tighten its monetary policy and upbeat US economic data weighed on sentiment, strong physical buying buoyed prices
Author: Rujun Shen (Reuters)
Posted:  Monday , 13 Dec 2010

SINGAPORE (REUTERS) - 
Spot gold held steady on Monday as healthy physical demand helped buoy prices, while China's move to further tighten its monetary policy and upbeat U.S. economic data weighed on sentiment.
China raised banks' reserve requirement ratio on Friday, as the country's inflation soared to a 28-month high in November and put pressure on the government to step up efforts to curb inflation.
 "There's the possibility that China would tighten its policy further," said Ong Yi Ling, an analyst at Philip Futures. "It could affect demand for commodities, and gold could be caught in a sell-off."  
 The dollar edged higher against a basket of currencies, supported by higher Treasury yields after improving U.S. data late last week.      
 A rise in U.S. consumer confidence to its highest in six months and a much bigger-than-expected contraction in the country's trade deficit pointed to a firmer economic recovery on Friday.    
Spot gold gained by 0.2 percent to $1,385.29 an ounce by 0304 GMT, after falling by 2.2 percent last week.     
U.S. gold futures edged up 0.1 percent to $1,386.6 an ounce.     
Spot gold is biased to fall even though it is range-bound between $1,371 to $1,395 per ounce, said Wang Tao, a Reuter's market analyst.      
Robust physical demand in the region helped support prices, dealers said.    
"The physical market is very good. Bullion traders and some jewellers are buying, as well as some individual customers who prefer to sell currency and buy gold," said Peter Fung, head of dealing department at Wing Fung Precious Metals in Hong Kong.    
India and China have both shown strong appetite, due to seasonal rise in demand, he added.     
 nvestors are eyeing a Federal Reserve meeting on Tuesday to see whether the proposed $600 billion stimulus plan would be carried out, or if further stimulus would be considered to jump-start the economy.
"If the Fed hints further QE (quantitative easing), it would provide some bullish support to gold," said Ong of Philip Futures. 
"On the longer term, some investors could be buying on dips, which also provides support to prices."   
Platinum group metals rose more than one percent, following strength in the industrial metals complex.  
 Spot platinum rose one percent to $1,682.99 an ounce, and palladium gained more than one percent to $736.97.    
 Three-month copper on the London Metal Exchange gained more than one percent, while LME zinc rose more than two percent.

Source: http://www.mineweb.com