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Mon 27 Apr 2015 12:08 PM

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Gold struggles below $1,200 on strong equities

Precious metal has languishing near its lowest in five weeks

Gold struggles below $1,200 on strong equities
(Getty Images)

Gold was
languishing near its lowest in five weeks on Monday, as robust equities dented
its appeal as a safe-haven, with investors also focusing on the Federal
Reserve's policy meeting this week for clues on the timing of a US rate hike.

Spot gold had
ticked up 0.3 percent to $1,182.70 an ounce by 0342 GMT. But it failed to make
much progress beyond its lowest since March 20 at $1,174.73, reached on Friday
as global equities climbed to all-time highs.

Bullion was
also weighed down by uncertainty over when the Fed would begin to hike rates.
Market expectations have been for a June rate hike, but recent soft economic
data has stoked speculation that the US central bank could delay the move to
September.

The Fed will
kick off a two-day policy meet on Tuesday, with investors watching out for
comments on the strength of the economy and the timing of monetary
tightening.   

"The
prospect for a less than hawkish change to the FOMC statement would likely
remove some of the near-term pressure that has been baked into the gold
price," said HSBC analyst James Steel, referring to the Federal Open
Market Committee.

However, this
is unlikely to mean more upside for bullion, as expectations for an eventual
hike in rates are likely to keep a lid on prices, Steel said.

Investors
believe a rate hike could dent demand for gold, a non-interest-paying asset.

In the wider
markets, the dollar started the week on the defensive after more disappointing US
economic data reinforced expectations the Fed would not hike interest rates
soon.

Asian shares
scaled seven-year highs following stellar earnings from a few US hi-tech
giants.

Gold is usually
seen as a safe-haven asset and tends to do well when riskier assets such as
equities underperform.

Traders also
continued to follow Greece's negotiations with its creditors.

After no deal
was reached between Greece and euro zone finance ministers in their meeting on
Friday, German Finance Minister Wolfgang Schaeuble hinted on Saturday that
Berlin was preparing for a possible Greek default.

A Greek default
or a potential exit from the euro zone could cause ripples in the global
markets, and boost haven bids for gold.

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