Gold Bounces From 2-Week Low As Stimulus Seen To Continue

Gold edged up on Monday, off a two-week low hit in the previous session on better-than-expected US jobs data, as the Federal Reserve is expected to continue to prop up the economy through 2013 with monetary stimulus, giving support to gold.

U.S. employers added a greater-than-expected 236,000 workers to their payrolls in February and the jobless rate fell to a four-year low, but Wall Street expects the Fed to continue its bond buying programme through 2013.

The Fed’s loose monetary policy has helped push gold to record highs in recent years, as investors seek a hedge against a rising inflation outlook due to cash printing by the central bank.

“Gold prices have built in the view that the U.S. recovery is on a good footing and by the end of the year we should seethe Fed exiting the stimulus, which should be bearish for gold,”said Jeremy Friesen, commodity strategist at Societe Generale in Hong Kong.

But a short-term bounce in gold is likely, as concerns about the strength of the U.S. recovery and expectations of aggressive
monetary easing from the Bank of Japan next month might spur buying, he added.

Spot gold inched up 0.2 per cent to $1,580.66 an ounce by 0306 GMT, recovering from a two-week low of $1,560.80 in the previous session.

U.S. gold was also up 0.2 per cent, at $1,579.90.

Technical analysis suggested spot gold looks neutral in the range of $1,564.44 to $1,585.90 an ounce, but is biased to fall below $1,564.44, said Reuters market analyst Wang Tao.

Holdings of SPDR Gold Trust, the world’s biggest gold-backed exchange-traded fund, fell 3.311 tonnes to 1,239.739 tonnes by the end of last week, the lowest since October 2011.

SPDR Gold Trust has seen more than 111 tonnes of outflow this year, wiping out the total 96.25 tonnes of inflow in 2012, reflecting investors’ shifting interest away from safe havens.

Echoing the sentiment of gold ETF investors, hedge funds and money managers cut their net long positions in U.S. gold futures
and options by nearly 27 per cent to 39,631 contracts in the week to March 5, the lowest since July 2007, Commodity Futures
Trading Commission data showed.

Net longs in silver dropped 47 per cent on the week to 6,118 lots, the lowest in more than seven months, the data also showed.

Spot palladium was little changed at $779.50, not far from Friday’s peak at $784.50, its highest since September 2011.