Gold prices held steady above $1,571 per ounce on Monday after falling more than 3 percent last week, but a firm US dollar and deflation worries triggered by a global economic slowdown were expected to keep a lid on gains. Inflation fears helped gold stretch its winning run to an 11th year in 2011, but investors are now starting to worry about deflation after recent reports showed signs of slowing global economic activity, already dented by the debt crisis in Europe.
Physical dealers, who have seen limited buying interest in recent weeks, said a slowdown in the global economy could force jewellers, investors and speculators to tighten their purses. Gold was steady at $1,571.59 an ounce by 0629 GMT after an early drop to around $1,567 spurred bargain buying from speculators, which sent prices to an intraday high around $1,576. Bullion has shed most of its early gains and is trading almost flat for the year.
"For the moment, I would say that without any market-moving news, gold will probably be rangebound. I see support at about $1,523 and the next resistance at $1,600," said Lynette Tan, Phillip Futures analyst Lynette Tan in Singapore. "I think for the week ahead, people will still watch the EU summit for price direction of equities and gold."
US gold for August delivery $5.80 an ounce to $1,572.70. Bullish hedge funds and speculators modestly boosted their bullish bets on commodity prices for a second week, data showed on Friday, leaving them more exposed to biggest rout in raw material prices this year. Managed money longs boosted their net longs in gold by 4,962 to 104,646 lots in the week up to June 19, the highest level since the first week of May. In the physical market, premiums for gold bars were unchanged at 80 cents to the spot London prices in Singapore, although there were offers at 50 cents.