Gold steady ahead of possible Greek bailout deal

Gold has been hovering around US$1,730 for most of this week
Gold has been hovering around US$1,730 for most of this week.
By Reuters
Thu 22 Nov 2012 12:20 PM

Gold traded in a US$5 range on Thursday, supported by central bank purchases and a weaker dollar as European leaders raised the possibility that a bailout deal for Greece was imminent.

Gold, up nearly 11 percent this year on the back of US monetary easing measures to stimulate its economy, has been hovering around US$1,730 for most of this week as investors focus on whether the United States will avoid a fiscal crisis.

But expectations of a looming Greek deal with lenders dented the dollar against the euro and aided gold prices. News that Brazil, Kazakhstan and Turkey had all increased their gold holdings also supported sentiment.

The euro rose to a two-week high versus the greenback after news of the possible Greek bailout, making dollar-priced commodities, such as gold, more attractive to buyers using euro and other currencies.

"The market is lacking direction right now and investors have become increasingly cautious," said Chen Min, an analyst at Jinrui Futures in the southern Chinese city of Shenzhen.

"The sentiment is mainly supported by concerns about the US 'fiscal cliff', which offsets the easing of geopolitical tension in the Middle East which should have dented gold's safe-haven appeal."

Spot gold was little changed at US$1,730.10 an ounce by 0739 GMT.

US gold inched up 0.1 percent to US$1,730.10.

The "fiscal cliff" refers to a US$600bn tax hike and spending cuts that are due to roll in early next year in the US, if Congress fails to reach an agreement to avert it, possibly sparking a recession.

In the Middle East, Israel and the Islamist Hamas movement ruling the Gaza Strip agreed on Wednesday to an Egyptian-sponsored ceasefire to halt an eight-day conflict that killed 162 Palestinians and five Israelis.

Technical analysis suggested that spot gold is poised to break resistance at US$1,734 per ounce and rise more towards US$1,749 during the day, said Reuters market analyst Wang Tao.

Spot silver rose to US$33.43 an ounce, its highest in more than a month, before easing slightly to US$33.31.

Silver has risen more than 20 percent so far this year, leading precious metals and dwarfing gold's gains.

Silver usually tracks moves in gold, but can also be influenced by riskier assets due to its industrial nature.

"It's driven by technicals, and gold's resilience is also supportive," said a Singapore-based trader.

Technical support could push the metal to US$37.53 in the next four weeks, said Reuters' Wang.

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