Gold edges down after positive US outlook
Singapore, March 20, 2012
Gold edged lower on Tuesday as a brightened US economic outlook dented its safe-haven appeal, while a buoyant equity market also prompted investors to take money out of bullion.
The expectations of further monetary easing worldwide amid a sluggish growth outlook had boosted investment in gold as a hedge against inflation, sending cash gold prices up as much as 14 percent this year to near $1,800 an ounce.
But the flight to safety has started to lose its appeal with upbeat US data in recent months increasing investor confidence in the recovery of the world's largest economy.
Spot gold lost 0.3 percent to $1,656.31 an ounce by 0337 GMT, snapping three straight sessions of gains. US gold fell 0.6 percent to $1,656.60. Technical analysis suggested that spot gold could break the resistance at $1,671 an ounce during the day, Reuters market analyst Wang Tao said.
"Investors are looking at other investment options, as they are less concerned about economic growth and more wanting to hop on the equity rally, which clearly works against some of the reasons why people buy gold," said Jeremy Friesen, commodity strategist at Societe Generale in Hong Kong.
The benchmark S&P 500 on Monday rallied to its highest level since May 2008 and 10 percent below the record close of 1,565.15 set in October 2007. The index has risen 12 percent so far this year, outstripping gold's 6-percent gain.
Friesen, however, cautioned that the momentum in US recovery could falter, putting the pressure back on the Federal Reserve to keep real interest rates low to support growth.
"Rising treasury yields are consistent with the very bullish outlook on U.S. economy, but we don't think that's on the cards yet."
US Treasuries prices fell on Monday, with longer-dated debt yields touching 4-1/2 month highs and investors likely to trim their bond holdings further on signs of an improving US economy and some stabilization of Europe's debt troubles. - Reuters