Gold held steady above $1,380 an ounce in Europe on Thursday as trade thinned ahead of the Christmas holidays, but was set for its first weekly gain in three as worries over euro zone sovereign debt lent support.
|||Gold held steady above $1,380 an ounce in Europe on Thursday as trade thinned ahead of the Christmas holidays, but was set for its first weekly gain in three as worries over euro zone sovereign debt lent support.
Spot gold was bid at $1,383.65 an ounce at 12:33 SA time, against $1,384.55 late in New York on Wednesday. U.S. gold futures for February delivery fell $3.10 to $1,384.30.
The precious metal is up 0.7 percent this week so far, as its appeal as a haven from risk rose after ratings agency Fitch said it could cut Greece's foreign currency rating, and Moody's threatened to downgrade debt-ridden Portugal.
“The prospect of further downgrades had an impact on the euro and (also) on gold,” said Peter Fertig, a consultant at Quantitative Commodity Research.
“This is probably calming down in the final few trading days of this year, but it will remain a topic going into next year. From that perspective, gold seems to be well supported.”
Currency traders are looking ahead to a raft of U.S. data due later, including U.S. personal income and spending numbers for November and a report on durable goods orders.
Ahead of this the euro held steady against the dollar and the Swiss franc on Thursday, helped by supportive comments from China, but analysts said the outlook for the single currency was shaky, with fresh losses expected into 2011. [FRX/]
A weaker euro and consequently stronger dollar would usually pressure gold, but its usual close inverse relationship with the dollar has weakened in 2010 as both benefit from risk aversion.
“We expect the New Year to bring... some violent moves across all asset markets as investment managers position for another highly uncertain year,” said Credit Agricole in a note.
“In the FX space, developed currency moves could become a 'race to the bottom' as debt concerns and liquidity constraints combine to force otherwise insignificant currencies into strong appreciations.”
European shares were flat in thin pre-Christmas trade on Thursday after hitting a 27-month high for a fourth day, while Bund futures were flat to slightly weaker on Thursday with markets pointing to sharper risk appetite into year-end.
SPDR GOLD ETF RECORDS OUTFOW
The world's largest gold-backed exchange-traded fund, New York's SPDR Gold Trust , recorded its biggest one-day drop since early October on Wednesday, with its holdings declining just over 9 tonnes to 1,288.616 tonnes.
The fund's holdings are up just over 2 tonnes since the end of November, against a rise of nearly 16 tonnes in the same period of last year.
Analysts say gold and the other precious metals could be in for some hefty gains next year.
While the prospect of tighter monetary policy, initially in China, could be a threat to the metals, persistent concern over sovereign debt is likely to benefit gold, while more industrial precious metals will be supported by economic recovery.
“There are a number of risks clouding the outlook for 2011, including the threat to growth from the transition to tighter liquidity conditions in China and uncertainty over the extent to which sovereign debt contagion will affect other European countries,” said Barclays Capital in a report.
“However, we expect an environment of sustained economic recovery, more supportive financial market sentiment and exceptionally easy monetary policy to provide a fertile ground for price gains early next year.
Among other precious metals, platinum was at $1,725.49 an ounce against $1,721.50, while palladium was at $748.97 against $748.25. Silver was bid at $29.20 an ounce against $29.20. - Reuters
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