Gold at 1-month high on economic recovery hopes

Singapore, January 23, 2013

Gold held near a one-month high on Wednesday but faces a strong resistance at $1,700 an ounce, as it struggles to attract fresh buying from investors who opted for riskier assets against the backdrop of a global economic recovery.

The US debt ceiling talks, seen as a potential threat to the recovery of the world's top economy, have shown positive signs, as the House of Representatives plans to pass a bill on a nearly four-month extension of the borrowing limit.

A rosier global economic outlook based on recent upbeat data from the United States, China and even Europe, has triggered rallies in equities and precious metals with industrial applications, including silver, platinum and palladium, putting gold in the shadow.  

"It looks like the debt ceiling problem is solved for the time being, and investors would pour money into the stock market rather than gold," said Ronald Leung, a gold dealer at Lee Cheong Gold Dealers in Hong Kong.

The Standard & Poor's 500 index hit a five-year high in the previous session, up 4.6 percent so far this month, outperforming the gain of 1 percent in gold - the worst performer in the precious metals complex.

Spot gold was little changed at $1,692.60 an ounce by 0328 GMT. It hit a one-month high of $1,695.76 in the previous session after the Bank of Japan announced bold stimulus measures in an attempt to revive the anaemic economy.

US gold traded nearly flat at $1,692.60.

Technical analysis suggested spot gold may rise to $1,706 an ounce during the day, as an upward wave starting from the January 11 low of $1,653.44 has not been completed, said Reuters market analyst Wang Tao.

SILVER SNAPS SEVEN-DAY RISE

Spot silver inched down 0.2 per cent to $32.12 an ounce, snapping a seven-day winning streak that matched a similar run in August 2011.

The robust inflow in silver-backed exchange-traded funds has helped spot silver prices rally more than 6 per cent so far this year, as the metal's exposure to a quickened pace in economic growth attracted investors.

Holdings of iShares Silver Trust, the world's largest silver ETF, stood at 10,689 tonnes on January 22, up 604.9 tonnes, or nearly 6 per cent from the end of 2012.

In comparison, SPDR Gold Trust, the world's top gold ETF, saw an outflow of nearly 15 tonnes so far this year.

Analysts polled by Reuters expected silver to recover from last year's decline before picking up next year. Gold could see average record highs this year and the next, but its bull run may be topping out. – Reuters

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