Gold rose in the early Asian trading on the first day of the week. The commodity almost took its losses from the past Friday’s losses. The advance is attributed to a stronger physical buying in Asia. In addition, investors are reconsidering the safe haven appeal of the precious metal as speculation spreads that stimulus by central banks around the world will be maintained for longer, because the latest economic data signaled that the global recovery may be losing momentum.
In Asian electronic trading, gold for future delivery in April gained $4.50 to trade at $1,576.80 per ounce.
Last Friday on Comex division of the New York Mercantile Exchange, the yellow metal lost $5.80 falling 0.4% to finish at $1,572.30 per ounce. July 18 was the last time we saw such a low settlement for this contract.
The Friday decline came as a respond to the spending cuts that kicked off in the US. The total spending of the US government is about $3.7 trillion. Therefore the $85 billion announced cuts won’t be significant enough to slow the economy, according to some analysts. However, this is one of the factors for the higher performance of gold on Monday.
The US dollar gained more momentum. Hence holders of other currencies found gold less appealing. On Friday the ICE dollar index was 82.265. Monday the index inched slightly higher to 82.289.
Interest towards physical buying in Asia is triggered by the weakness in the global market. Therefore, the gap between international and onshore prices extended further.
Later today, US Federal Open Market Committee member will release comments of its latest meeting. The result is expected to push the market to some direction later in the today’s session. The yellow metal has always been in a direct correlation with the Federal Reserve’s signals. It is very much likely that the central bank will continue its accommodative monetary policy. If there are no surprises, we can expect that the comments would be additional supportive factor for gold prices.
According to market analysts, there is a very probable chance for a retracement to $1,590-95 or even higher to $1,625 levels. As for now, gold prices are prone to look for supports level around the $1,535-40 range or even lower to $1,525. In terms of sustainability of the long-term gold bullish run this is very critical. As it comes to the long-term projections, after reaching all-time highs at $1,920 per ounce, the gold prices are still in consolidation.
Many analysts are positive that gold still could test $2,200-2,300 per ounce in 2013.
