Gold near one-week high, focus on Fed

Gold near one-week high, focus on Fed
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First Published: Wed, Mar 21 2007. 12 06 AM IST
Updated: Wed, Mar 21 2007. 12 06 AM IST
Singapore: Gold extended gains on Tuesday as speculative buying persisted after the precious metal breached a key resistance of $650 (Rs28,600) an ounce, with gains in shares offering additional support.
The physical sector saw light selling from Indonesia— Southeast Asia’s largest gold consumer. Spot gold hit an intraday high of $656 an ounce, just below Monday’s one-week high of $656.25, before slipping to $654.90/656.90 by 0400 GMT. The metal was last quoted at $653.30/654.30 late in New York.
But trading was subdued as a two-day meeting of the US Federal Reserve starts later in the day. With the Fed expected to hold its benchmark federal funds rate at 5.25%, investors will watch closely for any policy comments.
Shares of gold miners in Australia and Hong Kong rose after the metal hit a one-week high. Bendigo Mining jumped 3.4%, Newcrest Mining was up 0.8%, while Zijin Mining Group gained 1.26%.
“The degree of success of the twin tasks of the Fed’s efforts to manoeuvre the economy away from potential inflation pressures and prevent a housing sector slump would decide gold’s price in the near term,” said Pradeep Unni, analyst at Vision Commodities Services in Dubai.
Dealers said sentiment turned positive after gold broke $650 last week and stayed above that level, opening up a new range between $650 and $680. Key resistance was pegged at $660. In currencies, the dollar firmed to 117.76 yen while the euro was barely moved at $1.3291.
Expectations that the Fed could cut interest rates later this year were heightened by a broad stock market decline triggered in part by the subprime mortgage sector. But recent data showing no abatement in inflation pressures have checked the expectations.
Dealers are also eyeing the release later on Tuesday of US housing starts data. Benchmark gold futures for February 2008 delivery on the Tokyo Commodity Exchange rose to its highest in more than two weeks of 2,514 yen ($21.39) per gram, driven by gains in US and Japanese shares and a weaker yen.
“In the short term, we might see the gold price trading in an upward bias and possibly looking to go up to, let’s say, $660 an ounce,” said David Moore, commodity strategist at the Commonwealth Bank of Australia in Sydney.
“What’s happening is the gold market is consolidating after a period of quite significant volatility, when the gold price has been knocked around by movements in equity markets and movements in exchange rates,” he said.
Gold hit a six-week low of $632.30 on 6 March, when tumbling global stocks and a rising yen forced risk-averse investors to sell gold to cover losses. It fell to a one-week low of around $636 last week on fears of another global flight from risk.
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First Published: Wed, Mar 21 2007. 12 06 AM IST
More Topics: Money Matters | Commodities |