Gold pares losses, equities lure investors
Singapore, April 9, 2013
Gold pared losses on Tuesday as jewellers and speculators looked for bargains, but the metal was under downward pressure after US stocks gained ahead of an earnings season that is expected to show modest growth.
Speculators have also slashed their net longs as gold ignored tension between the two Koreas, and investors shifted their money to equities, seeking better returns, despite concern about the health of the US economy.
Gold fell as low as $1,569.94 an ounce and stood at $1,574.39 by 0343 GMT, up $1.30. It plunged to a 10-month low last week after unprecedented monetary stimulus from the Bank of Japan and hopes for another European Central Bank rate cut failed to stem heavy selling of bullion by funds.
"I can say the chart point doesn't look good. The bond and stock markets are more interesting than gold," said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.
"I think $1,585 is the crucial point. If it can break above this level, another bull run or short covering will push up the market to $1,600."
Gold rallied to an 11-month high in October last year after the US Federal Reserve announced its third round of aggressive economic stimulus, raising fears the central bank's money-printing to buy assets will stoke inflation.
Gold has fallen around 6 per cent so far this year after having posted an annual gain in each of the past 12 years. US gold for June delivery was $1,574.60 an ounce, up $2.10.
Institutional investor George Soros said gold had been destroyed as a safe-haven asset, but that he expected continued central bank buying to support prices, the South China Morning Post reported.
"I've seen quite good buying from Thailand after a holiday yesterday. I would say the purchases are from a mix of buyers, such as jewellers and speculators," said a physical dealer in Singapore.
"But some say gold may still test below $1,555. So that's why some people may want to wait for gold to test that level before buying."
In other markets, the yen fell to multi-year lows on the back of the Bank of Japan's aggressive reflationary campaign, and shares in Asia drew support from a solid start to the US quarterly earnings season.
A weak yen lifted the most active gold contract on Tokyo Commodity Exchange to its highest since February 8 – not far off a record high of 5,081 yen a gram hit the same month.
Just like spot gold, Tokyo futures ignored geopolitical tensions in North Asia.
North Korean labourers did not show up for work on Tuesday at a factory complex operated with South Korea, companies with operations there said, a move that effectively shuts down the zone for the first time since it began shipments in 2004.
Pyongyang's decision to halt work at the Kaesong industrial park coincided with speculation it would carry out a missile launch, or even another nuclear test, in what has become one of the worst periods of tension on the peninsula since the end of the Korean War in 1953.
"Maybe this guy is too young to be taken seriously," the physical dealer in Singapore said of North Korea's 30-year-old leader, Kim Jong-un, in a bid to explain why the tension has not driven investors to gold. - Reuters