Traders see market supported $980/oz on physical demand
Gold (GC-FT993.001.400.14%) edged down below $990 (U.S.) an ounce on Monday as the dollar rose versus the euro, prompting a liquidation of long positions in the market after bullion failed to stay above $1,000 an ounce.
But traders saw the precious metal supported around current levels due to jewellery demand picking up ahead of the festive period in India, one of the world's top gold consumers.
Spot gold was at $989.70 an ounce by 0915 GMT, slightly down compared with $990.95 an ounce late in New York on Friday, when gold hit a two-week low of $984.70 an ounce.
“The stronger dollar is the reason which pushed gold below the $1,000 an ounce level,” said Eugen Weinberg, Commerzbank analyst said.
Gold's inverse relationship with the dollar over the past few weeks has become stronger. Gold is often considered an alternative asset to the greenback, while a higher dollar makes commodities expensive for holders of other currencies.
The dollar fell against the yen but rose against higher-yielding currencies including the euro and the Australian and New Zealand dollars. The euro traded half a per cent lower at $1.4605, pulling further away from a one-year high around $1.4842 hit last week.
“The dollar feels like it has to go much lower from where it is and gold could benefit from that,” said Afshin Nabavi, head of trading at MKS Finance.
Over two weeks ago, gold hit $1,023.85 an ounce, its highest in eighteen months, within a striking distance of its record high of $1,030.80 an ounce struck in March 2008.
But bullion's failure to stay above $1,020 an ounce level has disappointed several investors and prompted an unwinding of long positions, which in the U.S. hit a record high for a third straight week.
“We're seeing some long liqudiation from the speculative side of the market. The major support is at $975 an ounce,” Mr. Nabavi said.
The non-commercial net long position in gold futures on the COMEX division of the New York Mercantile Exchange stood at an all-time high of 236,749 lots for the week ended Sept. 22, figures from the Commodity Futures Trading Commission showed.
“Having said that the reason why gold is gradually falling and not crashing is bargain hunters and physical buyers are picking up the dips,” Mr. Nabavi said.
U.S. gold futures for December delivery eased 0.07 per cent to $990.9 an ounce from $991.6 per ounce on the COMEX division of the New York Mercantile Exchange. On Friday, the contract fell $7.30.
The world's largest gold-backed exchange-traded fund, the SPDR Gold Trust (GLD-N97.00-0.55-0.56%) , said its holdings stood at 1,094.107 tonnes on Friday, unchanged from the previous business day.
Silver was lower at $15.94 from $16.00 “Silver is generally vulnerable to Comex profit-taking,” said analyst John Reade at UBS in a research note. “The fact that the surge in Comex speculative longs over the past three weeks has struggled to lift silver prices further flags a specific downside risk over the coming weeks.”
Platinum was at $1,274 from $1,272.5 and palladium was at $289 from $288.50.
