Gold eases from two-week highs as dollar ticks up
By Amanda Cooper
LONDON (Reuters) - Gold eased from two-week highs on Tuesday, breaking its longest stretch of daily gains since the start of this year, in line with the dollar paring earlier losses incurred by waning investor confidence in the reliance of the U.S. economy.
A sharp fall in business activity in the U.S. Midwest combined with data on Monday showing Spain was in recession dented investor appetite for risk and supported the safe-haven yen, which also rose against the broadly weaker Australian dollar.
Gold has drawn a degree of strength from the most recent spate of data from the United States that has revived expectations among some quarters of the investment community for the Federal Reserve to offer additional support to the economy via a third round of quantitative easing, or purchases of government bonds to anchor market interest rates.
Spot gold was down 0.1 percent at $1,661.59 an ounce by 0907 GMT. The price had risen for the five consecutive sessions to Monday.
Public holidays across continental Europe suppressed volumes in gold futures.
"What I would definitely say is, near term, I can't see the price breaking higher, to $1,700 an ounce or above. It needs another catalyst, something more powerful than perhaps in the near future there could potentially be QE," Nikos Kavalis, an analyst at RBS, said.
"Of course, an excessively loose monetary policy environment will continue but whether there is a need for another QE, I am not convinced," he said. "We are in an environment where market-specific fundamentals are taking a bit of a backseat and general sentiment is really the driving force."
Though the disappointing data may fuel expectations that the Fed might launch more QE, the central bank's top two policymakers both said they saw no need for further easing but also said they do not believe the Fed should quickly move to raise rates. (nL1E8FU562) (nL1E8G10JW) Continued...