Gold inched up on Monday, bouncing from a one-week low hit on Friday, supported by physical buying in Asia, but robust US economic data dented bullion's safe-haven appeal. Automatic spending cuts that kicked off in the United States on Friday, pushing spot gold to its lowest level in more than a week, also continued to weigh.
"The broad theme might be gold-negative, because the spending cuts are probably taking away a bit of the froth on the idea that policymakers are spending out of control and they will keep doing so until the recovery takes hold," said a Hong Kong-based trader. The popular gold forward contract on the Shanghai Gold Exchange stood at 320 yuan a gram by 0741 GMT, or $$1,600 an ounce, a premium of about $23 to spot gold.
"Most likely we will see banks bringing the metal onshore to take advantage of the wide spread," said the Hong Kong-based trader. Spot gold inched up 0.1 percent to $1,576.46 an ounce, recovering from a one-week low of $1,564.44 hit last Friday. US gold was up 0.2 percent at $1,576. Technical analysis suggested spot gold could fall to its February 21 low of $1,554.49, after a brief consolidation, as it is riding on a downward wave (5), said Reuters market analyst Wang Tao.