Gold off 3-month high; dollar supports
Singapore, February 24, 2012
Gold edged lower on Friday, although a weaker dollar supported positive sentiment
after upbeat economic data in the previous session weighed on the greenback and sent bullion to a three-month high.
Gold was headed for a weekly rise of more than 3 percent, its biggest one-week gain in nearly a month, after rallying for four straight sessions to push through a key technical level, aided by macroeconomic data.
Upbeat data from Germany on Thursday pushed the euro to a 2-1/2-month high against the dollar, helping gold as a cheaper greenback attracts buyers holding other currencies to dollar-priced commodities.
'Technicals, along with the weakness in the dollar, lead to gold buying,' said Peter Tse, director at ScotiaMocatta in Hong Kong.
Tse said technical indications suggested gold could test higher levels, after it broke key resistance around $1,760 on Wednesday, but some profit-taking selling could emerge ahead of the Group of 20 finance ministers meeting on weekend.
'Beware that any correction could be sharp and deep, even though the trend is still looking fairly good for the time being,' he added.
The euro zone debt crisis is expected to dominate the discussions at the G20 meeting, before a European Union summit on March 1-2.
Spot gold edged down 0.2 percent to $1,777.04 an ounce by 0149 GMT, off a three-month high of $1,787.11 on Thursday. US gold lost 0.4 percent to $1,779.10.
Investors will also be watching a second three-year long-term refinancing operation (LTRO) allotment by the European Central Bank on Feb 29, which is expected to inject nearly half a trillion euros to banks.
Hopes of more monetary easing by central banks have helped gold rally nearly 14 percent this year, as any injection of cheap cash raises the inflation outlook, which polishes gold's appeal as an inflation hedge.
Spot silver lost 0.1 percent to $35.28 after a hefty 3 percent rise in the previous session pushed prices to $35.59, a level unseen in nearly four months. - Reuters