Gold rose about 2% on Monday as a fall in the dollar against the euro increased the yellow metal’s appeal as an alternative asset, but further buying was capped by uncertainty over the global economic outlook.
Investors mostly stayed on the sidelines ahead of a meeting next weekend of world leaders to discuss precisely what measures they need work out in the coming months, analysts said. Spot gold stood at $749.50 an ounce as of 0631 GMT, up 2% from a notional close in New York of $734.80 on Friday. It earlier rose as high as $753.00, a level last marked on Thursday. But buying has withered since the euro came off an earlier high near $1.29, dragged down by expectations of more interest rate cuts to support the regional economy. It was up about 1% at $1.2860.
“Gold’s early jump to $750 came as a result of one-off stop-loss unwinding of short gold and long dollar (against the euro) positions,” said a manager at a Japanese trading firm, adding that activity other than such technical moves remained low. “Money inflows are drying up, in particular from speculative investors,” he said.
China launched a huge stimulus plan on Sunday worth nearly $600 billion, marking what could be the start of a round of big spending or interest rate cuts by leading economics to stave off a recession in many countries. A rally in Asian shares largely reflected hopes that China’s spending plan could offset slowing economies in the United States and Europe and eased fears that a global recession would contain demand for gold.
Another bright spot was a recovery in oil prices, which often move in the same direction as gold. US crude oil futures rallied more than $3 to above $64 a barrel, fuelled by top exporter Saudi Arabia’s plans to cut December supplies to Asia. But buying was not aggressive enough to push gold above $760 an ounce, analysts said. “It looks like gold is being lifted by the same type of temporary optimism we saw on Nov. 4 and 5,” said Kaname Gokon, deputy general manager at Okato Shoji Co.
Gold rose as high as $768 last week as investors moved to commodities and stocks, relieved that the US presidential election on Nov. 4 had gone smoothly. “But uncertainty still hangs over us going forward,” Gokon said, adding that gold could test $700 if it breaks below $720. (Reuters)