ZW: Gold again consolidates on lower euro as investors mull over bad US data,
London, 20 August 2010 - Gold was again consolidating in Europe on Friday, after rising to a new seven-week high yesterday on a lower euro and as investors absorbed a new batch of bad economic data from the US - little action is awaited in the coming hours.
Spot gold fell $1 to $1,230.50/1,231.30 per ounce, taking another breath from a fresh seven-week high of $1,237.50 per ounce hit late in the previous session. The metal has been attempting to break higher over the past few sessions - it has reached multi-week peaks for six consecutive days - but found strong resistance levels on the way.
"Gold continues its relentless rise off the July low (of around $1,155)," broker Barclays Capital said. "Throughout the rally, retracement levels of the preceding fall in June/July have repeatedly provided temporary resistance."
"Consequently, as price approaches the next major batch of resistance between $1,242/1,245, we are wary of a near-term correction," it added.
The euro fell back to 1.276 versus the US dollar, failing to recapture significant ground above multi-week lows of 1.2732 touched at the start of the week.
There is little in the way of major economic news today, in the absence of which markets will turn to the wider financial arena for direction, as well as eddies in currency markets.
"There is little data of note forthcoming today, so it will be interesting to see how the market closes out the week after yesterday’s events have been digested," a trader said.
Thursday's soft weekly jobs report, a negative reading for Philadelphia manufacturing sentiment and a downward revision to the Conference Board leading index for June all combined to feed markets a gloomy outlook on the state of US recovery.
"Investors seem to be worried about an economic slowdown in the US and keep buying US treasuries and gold," Stephen Mueller of Julius Baer said.
In wider markets, Asian shares were mostly lower after Wall Street tumbled on data confirming a bleak outlook for the US jobs market. They were followed by a by an initial steadier tone in European bourses, before a retreat towards flat territory.
Meanwhile, uncertainty rose over whether the Bank of Japan would hold an emergency summit on further monetary stimulus before an expected meeting between Prime Minister Naoto Kan and BOJ Governor Masaaki Shirakawa on Monday.
"Worries over inflation in Asia likely will increase demand for the metal as a safe haven investment," broker Fairfax said.
Among other precious metals, silver fell four cents to $18.26/18.31 per ounce.
Elsewhere, platinum was down $16 to $1,514/1,520 per ounce and palladium dropped $6 to $480/485 per ounce.
"Silver and PGMs suffered as result of the weak economic outlook and could not follow the gold on its way up," Mueller said.
