September 20, 2012 / 2:47 PM / in 5 years

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

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.

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

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

“The rise in gold and silver will be tempered by drops in the stock market and rises in the dollar, and if this continues then the upside is limited for the time being,” Marex Spectron said in a note.

“However support remains under the market and I still believe buying dips is the way forward in the longer term.”

RESISTANCE MET

In a note, technical analysts at Societe Generale, who study past price patterns for clues as to the future direction of trade, said gold had reached descending channel resistance “which has been shaping for a year now” at $1,777.

They said in the short term, the metal has broken the steep channel support line in place since early September. “A further correction will develop to $1,756/53 then $1,745 and $1,736,” they wrote.

Holdings of gold exchange-traded funds - popular investment vehicles that issue securities backed by physical bullion - eased back from record highs with an outflow of 607,000 ounces on Wednesday, Reuters data showed.

Outflows were seen from products operated by London-based ETF Securities and Zurich Cantonalbank.

Among other precious metals, silver was down 0.6 percent at $34.36 an ounce, while spot palladium was down 0.6 percent at $662.97 an ounce.

Spot platinum was down 1.2 percent at $1,612.75 an ounce. The metal has fallen by more than 5 percent this week, on track for its biggest weekly drop since December, as strike action at third largest miner Lonmin wound down.

Thousands of miners at Lonmin’s (LONJ.J)(LMI.L) Marikana operations in South Africa returned to work on Thursday after a hefty pay hike ended a six-week strike, but nearby mines faced more industrial action with workers demanding similar raises.

Forty-six people died during the wildcat strike at Lonmin, while threats of supply constraints pushed platinum price more than 20 percent higher.

Editing by Alison Birrane and James Jukwey

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