Gold rose more than 1 percent on Monday, as European leaders edged towards a solid plan to resolve the eurozone debt crisis and signs that China's economy is in better shape than feared. In recent weeks gold prices have followed moves in riskier assets, with the precious metal's safe-haven appeal diminishing after wild price swings in the past quarter. Gold gained along with other commodities and world stocks.
Spot gold rallied 1.3 percent to $1,661.59 an ounce and was at $1,652.39 by 1345 GMT, after falling more than 2 percent last week. US gold rose more than 1.4 percent to $1,663.30 before easing to $1,653.30.
"The equity markets are rising, the rest of commodities are rising, but the gold price is not coming under pressure. It's also probably pointing to the possibility that the situation could again become critical," Commerzbank analyst Eugen Weinberg said.
Some progress was made in Brussels over the weekend, with agreements near on bank recapitalisation and on how to leverage the European Union's EFSF rescue fund to try to stop bond market contagion. But final decisions were deferred until a second summit on Wednesday and sharp differences remain over the size of losses private holders of Greek government bonds will have to accept. The euro retreated from a six-week high against the dollar.
"Gold popped up this morning along with most of the commodities markets. The beginning of the EU debt resolution has had a strengthening effect on commodities and equities as a whole," Credit Suisse analyst Tom Kendall said. China's vast manufacturing sector picked up moderately in October, snapping a three-month contraction and underscoring the resilience of the world's second-largest economy backed by robust domestic demand.
"The China PMI got the market fired up, with a lot of shorts covering as the data suggested that the slowdown in China may have peaked," said David Thurtell, a Citigroup analyst. In the eurozone, the private sector tipped further into decline in October, according to business surveys on Monday that showed the bloc's economy is in serious danger of lurching from stagnation into outright recession.
Economist Intelligence Unit (EIU) economist Caroline Bain said gold's recent losses in the wider commodity sell-off had surprised because it appeared that uncertainty was increasing. "However, we believe that gold will outperform the industrial commodities over the six months as uncertainty will persist," Bain said in an interview in Reuters' gold forum.
Benchmark copper on the London Metal Exchange rose more than 4 percent on Monday. Spot palladium led the rise in precious metals, rising more than 3 percent to $630.75, after suffering a decline of 1.5 percent last week. It was last at $625.47. The metal, used mainly in making autocatalysts for gasoline-powered engines, was still the worst-performing precious metal so far this year, down 21 percent.
Investors' interest in gold remained lacklustre. Net long positions in US gold futures and options hovered near an eight-month low and total open interest dipped to a three-month low in the week ended on October 18, data from the US futures regulator showed. Holdings in the SPDR Gold Trust stood unchanged at 1,227.511 tonnes throughout last week.
The world's largest gold-backed exchange-traded fund has seen a small outflow of about 4 tonnes so far this month, and the holdings were down about 53 tonnes from the end of 2010, according to the fund's website. "Gold investor interest has stabilised and physical demand continues to emerge, albeit at softer levels," Barclays Capital said in a note.
Comments
Comments are closed.