Gold hovers below $US940

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This was published 14 years ago

Gold hovers below $US940

Gold prices were almost flat on Friday after dipping the previous day when weak US manufacturing data revived risk aversion and lifted the US dollar, dulling the precious metal's allure as an alternative asset.

Bullion has recently been underpinned by optimism about the economic outlook and hit a two-week high of $US941.95 an ounce on Wednesday. But further buying failed to emerge, with investors keeping an eye on the course of the dollar, economic data and corporate earnings.

Spot gold stood at $US936.70 in Asian trade, slightly higher than New York's notional close of $US936.35 on Thursday, when it fell about $US2.

It is poised to rise 2.7 per cent on the week if it stays at the current level. That would mark the precious metal's biggest weekly percentage gain in almost two months.

"There are no aggressive buyers who dare to buy at a level above $US940, and this is setting the market's tone right now," said Kaname Gokon, deputy general manager at Okato Shoji Co.

"But after seeing a rally led by powerful buying from the gold ETF recently, few people want to test the downside, either. There are physical needs to buy gold and sell the dollar when gold is at $US920-$US930," he said.

The dollar hit a six-week low against a basket of major currencies on Thursday, but later rebounded after data showed factory activity in the US mid-Atlantic region contracted for a 10th straight month in July.

The US dollar hovered near that low on Friday, with investors cautiously awaiting earnings reports from banks for signs of recovery in the sector.

US gold futures for August delivery rose $US1.4 or 0.2 per cent to $US936.80 an ounce. The contract settled down $US4 at $US935.40 on the COMEX division of the New York Mercantile Exchange on Thursday.

Light selling in Tokyo gold futures, triggered by a firmer yen versus the dollar, was also helping to cap bullion's topside.

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The benchmark Tokyo Commodity Exchange gold futures for June delivery fell 9 yen to 2829 yen per gram.

Investors here often sell to factor a stronger yen into the yen-based futures prices on TOCOM, a market that typically tracks dollar-based gold prices.

The TOCOM market will be closed on Monday for a public holiday.

Some traders said the market has already hit a summer lull and settled into range-bound trade.

"Overall, the dominant situation right now is summer holiday. It is also a quiet season (on the manufacturing side). There is not so much demand in the market," said Dick Poon, manager of precious metals at Heraeus.

"The market is consolidating. A resistance level sits at around $US950," he added.

Holdings by the world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, rose to 1094.85 tonnes on Thursday, up 0.31 tonnes from the previous business day.

It was the first rise after falling for six straight weeks from a record of 1134.03 tonnes hit on June 1.


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