SINGAPORE (Reuters) - Gold held steady above $1,580 an ounce on Tuesday after rising in the previous session as growing uncertainty on whether a key European Union summit this week will be able to resolve the region’s debt crisis supported the precious metal.
The Thursday-Friday summit will be the 20th time EU leaders have met to try to resolve the spreading crisis which had sent gold prices to a record about $1,920 an ounce last year as investors turned to the safety of the precious metal.
Gold hardly changed at $1,584.32 an ounce 10:46 p.m. EDT (0246 GMT), within sight of an intraday high around $1,587 hit on Monday, when Cyprus announced it was seeking a lifeline for its banks and its budget.
“If the U.S. dollar remains strong, then gold may easily move down a little bit. We have to see if people are losing confidence in gold. One thing is for sure the world’s economy is slumping,” said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.
“Sentiment in general is a bit mixed. If you have less money in your pocket, why should you buy gold? The only thing that people are buying for the time being is the U.S. dollar.”
Inflation fears helped gold stretch its winning run to an 11th year in 2011, but markets are now worried about a slowing global economic activity caused by the crisis in Europe, which could force jewelers, investors and speculators to tighten their purses.
U.S. gold for August delivery slipped $3.20 an ounce to $1,585.20.
In other markets, shares fell and the euro held near a two-week low on growing concerns the EU summit would fail to make any significant progress to tackle the debt crisis and further wreak havoc on a slowing global economy. <MKTS/GLOB>
German Chancellor Angela Merkel dashed any lingering hope in financial markets on Monday that Europe would issue common euro zone bonds to help indebted countries, calling such an idea “economically wrong” and “counterproductive.
The physical market noted bargain hunting from consumers, but a further rebound in prices could spur another round of selling. Premiums for gold bars were little changed at between 50 and 80 cents to the spot London prices in Singapore.
“We still see light buying, but it’s not necessarily coming from a specific area such as Thailand,” said a dealer in Singapore. “We expect Indonesia to buy more before the Ramadan,” said the dealer, referring the Muslim fasting month that starts in July.
Holdings of the largest gold-backed exchange-traded-fund (ETF), New York’s SPDR Gold Trust, and that of the largest silver-backed ETF, New York’s iShares Silver Trust, remained unchanged on Monday from Friday. <GOL/ETF>
Editing by Himani Sarkar