April 30, 2012 / 3:37 AM / 5 years ago

Gold holds above $1,660/oz on monetary easing talk

Gold Bullion from the American Precious Metals Exchange (APMEX) is seen in this picture taken in New York, September 15, 2011. REUTERS/Mike Segar

LONDON (Reuters) - Gold prices steadied above $1,660 an ounce on Monday, taking a breather after four straight days of gains, as prices took support from speculation the Federal Reserve could launch a new round of monetary easing.

Spot gold was at $1,662.31 an ounce at 0942 GMT against $1,662.32 late on Friday, while U.S. gold futures for June delivery were down $1.30 an ounce at $1,663.40.

The metal retreated from early highs as the dollar firmed a touch against the euro, with the single currency hurt by caution ahead of a European Central Bank meeting and elections in France and Greece this week. It is firmly underpinned, however. <FRX/>

Softer-than-expected U.S. growth data on Friday reignited speculation that the Fed could take fresh measures to stimulate the economy by raising money supply, a move likely to undermine the dollar and keep real interest rates at rock bottom.

Non-yielding gold, which is priced in dollars, tends to benefit in such an environment.

“We had the GDP data from the United States, which (fuelled) higher hopes of quantitative easing,” LGT Capital Management analyst Bayram Dincer said. “Analysts have really decreased (their expectations for QE), but I feel if the conditions are right, we can still see some sort of quantitative easing.”

Gold traders are awaiting the outcome of a French debt sale later on Monday, as well as an ECB press conference and rates decision on Thursday, for clues on the outlook for the euro zone economy. U.S. payrolls data on Friday will also be a key driver.

Gold’s ability to hold above $1,620 an ounce this month, despite several tests of that level, is cheering investors that the longer term bull trend is intact, analysts said.

“After peaking in mid-first quarter, gold prices fell amid renewed volatility. We note such corrective price movements have been evident throughout the 2001-12 bull market, especially since the acceleration in the uptrend from 2009,” Morgan Stanley said in a note.

“Notably, this latest correction, while painful, has not retested the late December 2011 lows and has so far been notably less severe than the retracement in the second half of 2011.”

ETF HOLDINGS RISE

Money managers in gold futures and options cut net long positions in the week ended April 24 for their third decline in four weeks, as the metal’s price failed to break out of a narrow range by last Tuesday. One market watcher noting that the “speculative fervor” had gone out of gold.

On Friday, holdings of gold-backed exchange-traded funds rose, with the largest, New York’s SPDR Gold Trust, adding nearly 78,000 ounces to its reserves, its largest one-day inflow in nearly a month. <GOL/ETF>

Concerns about offtake of physical gold, particularly in number one bullion consumer India, in recent weeks have knocked investors’ confidence the precious metal. Indian sales have been pressured by rupee weakness and high spot prices.

“Indian buying will never disappear; after all, gold is well-engrained in the country’s culture and traditions,” UBS said in a note. “What is likely though is a continuation of the unimpressive... demand that we have seen in recent months.”

“Although physical demand is not typically the force that drives a rally, the significance lies in its ability to come in and provide a floor during a pullback,” it added. “With the rupee expected to weaken further up ahead, this means the dollar price of gold needs to ease up even more than where demand was evident over the past few weeks in the $1,620-1,630 area.”

Among other precious metals, silver was down 0.1 percent at $31.20 an ounce. Spot platinum was up 0.1 percent at $1,568.49 an ounce, while spot palladium was up 0.2 percent at $679.47 an ounce.

The platinum/palladium ratio, which measures the number of palladium ounces needed to buy an ounce of platinum, fell to its lowest in nearly three months on Monday at 2.31 as platinum continued to underperform against its fellow autocatalyst metal.

Platinum is set to fall 4.6 percent this month, while palladium is on track to rise 4.9 percent and gold is headed for only a marginal decline.

Miner Aquarius Platinum posted a net loss for the third quarter, hit by weaker prices and a drop in production on the back of poor ground conditions, continuing safety stoppages and worse than usual absenteeism after the Christmas holidays.

Reporting by Jan Harvey; Editing by Alison Birrane

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