Singapore: Gold edged down on Monday after rising nearly 2% in the previous session to above $1,400 an ounce, but a struggling US dollar could still spur buying from investors.
Silver jumped to its strongest since early 1980, tracking the price of gold which could rally again on any signs of a weaker US economy or if tensions between the two Koreas flare up again.
South Korea started on Monday a nation-wide live-fire naval exercise, despite Pyongyang’s warnings against conducting the drills in disputed waters off the west coast of the peninsula.
“Looking at the relatively strong rise in gold following the numbers on Friday, the market seems to be taking a bit of a breather,” said Darren Heathcote, head of trading at Investec Australia in Sydney.
“We might well drift through for a short time.” Spot gold fell $2.45 an ounce to $1,411.90 by 08:20 am after rising as high as $1,415.36 on Friday as the dollar tumbled following disappointing jobs data in November.
Bullion hit a record high around $1,424 an ounce in November.
Cash gold may rise further towards $1,435 an ounce as a new labeling of its wave pattern suggests a potential extension of the current rally, according to Wang Tao, who is a Reuters market analyst for commodities and energy technicals
US gold futures for February rose $7.1 an ounce to at $1,413.35 an ounce.
The dollar was on the defensive on Monday after the US Federal Reserve said it was open to injecting more funds into the economy, while investors took a breather after having pushed Asian stocks to three-week highs.
Gold had seen a bit of buying related to the tension in the Korean peninsula after North Korea’s artillery attack on a southern island last month, although investors were paying more attention to the debt crisis in Europe and talk about another round of US quantitative easing.
Fed chairman Ben Bernanke was reported in an interview with CBS television as not ruling out further bond purchases beyond the $600 billion already announced.
“I think we are watching the tensions in Korea, and whether China will hold talks on this issue. You can say the US economy will recover only very slowly, so if there’s no change, there will be a second round of quantitative easing,” said a dealer in Hong Kong.
“I think sentiment in gold is still bullish. We are waiting to break a new high. We are seeing more buying from investors than from jewellers.”
The world’s largest gold-backed exchange-traded fund, SPDR Gold Trust , said its holdings slipped to 1,298.030 tonnes by 3 December from 1,298.447 on 2 December. The holdings hit a record at 1,320.436 tonnes on 29 June.
The Nikkei average inched lower on Monday after weak US jobs data and a renewed focus on US quantitative easing pushed the dollar down against the yen, encouraging profit-taking in Tokyo stocks after they hit a six-month high last week.