CNBC: Gold retreats from 6-1/2 month high as dollar firms
LONDON (Reuters) - Gold prices eased nearly 1 percent on Monday, pulling back from the previous session's 6-1/2 month high, as the dollar rose and assets seen as higher risk, like stocks, the euro and other commodities like crude oil, retreated.
The metal remained underpinned however, by expectations for longer-term price strength, after central banks including the Federal Reserve and the European Central Bank announced fresh rounds of monetary policy easing earlier this month.
Spot gold was down 0.5 percent at $1,764.81 an ounce at 1341 GMT, while U.S. gold futures for December delivery were down $11.20 an ounce at $1,766.80. On Friday, gold hit a peak of $1,787.20, its highest since February 29.
The Fed this month launched a third round of quantitative easing - printing money to buy bonds - under which it will purchase $40 billion a month in mortgage-backed debt until the outlook for the labour market improves substantially.
Further monetary easing is likely to maintain pressure on long-term interest rates, keeping the opportunity cost of holding gold at rock bottom, and to undermine the dollar, boost liquidity, and stoke fears over inflation further down the line.
"A lot of (investors) bought ahead of the announcement, and now they're selling out again to lock in the gains," HSBC analyst Howard Wen said. "But the longer-term players are still in the market, most notably the exchange-traded fund buyers."
Wen said he expects prices to trade higher between now and the end of the year. A stronger dollar and caution among investors over the uncertain outlook for Europe has put the brakes on gold in the short term, however.
European shares and the euro followed a broad range of riskier assets lower on Monday as investors refocused attention from central bank stimulus schemes to weak economic fundamentals and the euro zone's yet-to-be-resolved debt crisis. <.EU>
"There are a number of low growth concerns which could underpin the dollar, and keep gold somewhat moribund near term," Deutsche Bank analyst Daniel Brebner said.
"But I do think we will likely see over the next quarter or so greater policy action both in Europe and China to support growth within those regions. The likelihood is for further accommodative monetary policy in both regions, and that could keep the gold price moving higher."
GOLD ETF HOLDINGS APPROACH RECORD
Holdings of gold-backed exchange-traded funds tracked by Reuters rose by nearly 330,000 ounces on Friday to 73.748 million ounces, climbing back towards last week's record high at 73.681 million ounces.
The bulk of inflows were seen into the world's largest gold ETF, New York's SPDR Gold Trust. ETFs, which issue securities backed by physical metal, have proved a popular way to invest in gold in recent years.
Meanwhile, demand in major consumer India picked up, as a drop in local gold prices to a three-week low on Monday prompted a wave of buying, while an upcoming week-long holiday in China has generated some physical gold buying interest.
Among other precious metals, silver was down 1 percent at $34.07 an ounce.
The gold/silver ratio, which measures the number of silver ounces needed to buy an ounce of gold, recovered from last week's 5-1/2 month low at 50.9 to 51.9 on Monday, after silver underperformed the yellow metal late last week.
Technical analysts at ScotiaMocatta, who study past price moves for clues as to the future direction of prices, said they expect the ratio to continue falling. "While the ratio has been consolidating the past week, the larger trend remains bearish, with an initial target at the March low of 47.67," it said.
Spot platinum was down 1.4 percent at $1,615.10 an ounce, while spot palladium was down 4.7 percent at $637.47 an ounce, on track for its biggest one-day drop since early March.
That took palladium to its cheapest versus platinum since the end of November last year, at 2.45 palladium ounces per platinum ounce. The premium added to platinum group metals by labour unrest in South Africa has shrunk, analysts said.
Industrial unrest in major platinum producer South Africa has simmered down during a national holiday in the republic, after weeks of sometimes violent protest killed 45 and sent the metal to multi-month highs. Tensions remain elevated, however.
(Reporting by Jan Harvey; Editing by Alison Birrane)
