Gold prices eased a touch on Monday as the dollar firmed against the euro, but uncertainty over the outlook for the global economy continued to support investment in the metal as a safe store of value. Spot gold was bid at $1,225.35 an ounce at 1518 GMT, against $1,226.95 late in New York on Friday. US gold futures for December delivery fell $1.80 to $1,227.00.
The precious metal rallied to a 1-1/2 month high at $1,237.15 an ounce last week after a spate of lacklustre US data knocked confidence in the economic recovery, boosting interest in the metal as a haven from risk. "All the signs are that for the US economy, the fast part of the recovery is over, and it is now making modest gains. The gains are simply not enough to reduce unemployment," said Citigroup analyst David Thurtell.
"There are concerns about the flow-on that will have on the equity markets, so that is helping gold," he said. "There are also more signs, perhaps, that the Fed will have to do some more quantitative easing." Investment demand for gold has increased in recent sessions, with holdings of the world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, rising by nearly 13 tonnes last week, its biggest one-week climb since early June. Commerzbank noted that data from the Commodity Futures Trading Commission showed a fourth consecutive weekly rise in speculative net long positions in New York gold futures in the week to August 17.
"At 18,600 contracts or 11.7 percent, the rise was even sharper than before in this reviewed period," it said. "Net long positions of 177,000 contracts is also the highest level since the start of July." "This shows that financial investors have been a major force in this recent rally of gold prices," it added. The dollar rose 0.4 percent versus the euro on Monday as the single currency was hurt by concerns over the eurozone economy and prospects of loose monetary policy until year-end.
Strength in the US unit usually weighs on gold, as it curbs the metal's appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies. European shares bounced back from one-month lows as more merger and acquisition news improved sentiment, while US stocks were broadly flat. High prices weighed on jewellery demand in major gold consumer India. Dealers in Mumbai reported a retreat in wholesale gold demand as stockists awaited a fall in prices.
Silver was at $17.97 an ounce against $17.98. Platinum was at $1,506 an ounce against $1,506.50 and palladium at $477.50 against $473. Gold has become increasingly expensive compared with the industrial precious metals in recent weeks as concerns over the outlook for economic growth have increased. The ratio of gold to platinum and silver has risen to its highest since early June.