Gold retreats from 6-1/2 month high as dollar gains

Thu Sep 20, 2012 10:43am EDT
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By Jan Harvey and Amanda Cooper

LONDON (Reuters) - Gold eased on Thursday as a stronger dollar and weaker oil and stock markets prompted some investors to cash in gains after the previous day's 6-1/2 month high, though the positive impact of recent central bank stimulus measures limited losses.

The gold price rose as high as $1,779.10 an ounce on Wednesday after the Bank of Japan became the latest to unveil another round of monetary easing, after bond-buying programs were announced in the United States and euro zone earlier this month.

Monetary easing tends to benefit gold by keeping up pressure on long-term interest rates, and consequently the opportunity cost of holding bullion, as well as weighing on the dollar, stoking longer-term inflation fears, and boosting liquidity.

Spot gold was down 0.5 percent at $1,760.70 an ounce at 10:16 a.m. EDT (1416 GMT), while U.S. gold futures for December delivery fell $8.30 an ounce to $1,763.30. The price is set for a decline of 0.4 percent so far this week, its first weekly fall since August 19.

"The general mood is still positive. I think the longer we stall here, the greater the chances of a correction because the U.S. dollar is bouncing back up," Andrey Kryuchenkov, an analyst at VTB Capital, said.

"You could see gold tumble back to $1,720, into that area, and then gradually recover," he said, adding that demand from consumers or central banks would likely materialize around this point to arrest any deeper price slides.

The euro pared some losses on Thursday, but still hovered near one-week lows against the dollar after a reading of regional business activity beat expectations in September. <FRX/>

U.S. stocks fell after data showing slowing growth in China and Europe, and weak U.S. employment figures, underscored the headwinds faced by the global economy even as central banks aggressively step up stimulus measures. .N   Continued...

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