Gold steadied on Monday, supported near record highs as investors fretted about the outlook for the dollar amid speculation of further US monetary easing, but with a recovery in the US unit keeping a lid on gains. Spot gold was bid at $1,315.55 an ounce at 1347 GMT, against $1,315.60 late in New York on Friday. It touched a record $1,320.80 an ounce in that session.
US gold futures for December delivery eased $1.20 to $1,316.60. The dollar slipped last week and gold rose to a series of record highs after a string of lacklustre US data reports raised concerns that the US authorities would have to take action to boost sluggish growth.
It struggled to gain traction on Monday, however, as resurgent fears over some eurozone economies, most notably Ireland, helped the dollar recover from the 6-1/2 month low it hit against the euro earlier on Monday. "Gold is holding up comparatively well considering the rebound in the US dollar. Friday's highs were tested, and the price has come in for light profit-taking," said David Thutell, an analyst at Citigroup.
"(But) I suspect that for many months there will be enough market participants who don't buy the recovery story and will keep buying gold." Analysts said the dollar may find some short-term relief as investors cover short positions in the currency, but many say the trend for dollar weakness is intact amid ongoing speculation the Federal Reserve could ease US monetary policy further.
Analysts are now eyeing key US non-farm payrolls data due on Friday for clues as to the next direction of the dollar. "Continued deterioration in US economic data would reinforce the already negative sentiment surrounding the dollar," said CMC Markets analyst Michael Hewson in a note. "This Friday's US employment and payrolls report for September should offer clues as to whether or not the US economy is starting to turn around."
However, concerns about the stability of the eurozone have again come to the forefront. The Irish central bank said on Monday that Ireland's economy would crawl to a virtual halt this year, defying government hopes of modest growth, underlining the challenge the country's leaders face to revive its fortunes.
Concerns over the stability of the dollar and the euro are both gold supportive. A Reuters poll of analysts last week found most felt gold's run to record highs is likely to continue for the rest of 2010, with two out of three seeing prices above $1,350 by year-end. Eleven out of the 21 analysts polled said they expected the precious metal to be trading between $1,350 and $1,400 an ounce by December 31, while two respondents saw prices higher still. On the physical markets, gold demand was firm despite near-record prices.
Buying by Indian gold jewellers showed no sign of slowing as a strong rupee helped consumers defy record bullion prices during the festive season, dealers said. A senior official at the World Gold Council told Reuters that central banks in Russia, China and the Philippines are expected to continue raising their gold holdings to balance their reserves, a potentially significant demand driver.
Silver was at $22.09 an ounce versus $21.97. As a smaller and less liquid market, silver has outpaced the rise in gold prices so far this year, with the gold-silver ratio - the number of silver ounces needed to buy an ounce of gold - dipping below 60 for the first time in nearly a year last week. Elsewhere platinum was at $1,671.50 an ounce against $1,675.15, and palladium at $568 against $569.50.
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