RTRS: Gold hovers near $950 as dollar eyed, ETF unchanged
By Chikako Mogi
TOKYO (Reuters) - Gold prices steadied near $950 on Tuesday after hitting a six-week high the day before, with the dollar continuing to drive bullion as its drop and better U.S. corporate earnings raised the metal's appeal as an inflation hedge.
Rising oil prices, a rally in stock markets and a weak dollar have encouraged investors to take more risks, buying high-yielding currencies and commodities including gold.
A brighter economic and financial sector outlook has made investors more aware of future inflation risks, while a weaker greenback has made dollar-priced gold cheaper for holders of other currencies.
"Oil, stocks and currencies are all favorable for gold," said Ronald Leung, a director at Lee Cheong Gold Dealers in Hong Kong.
"The economy seems to be stabilizing, making people think about inflation," he said.
But gold, while confirming a floor of just above $900, may face a correction in the near-term as investors await more clues to see if the economy is really stabilizing, he said, adding that stop-loss selling hit around $950 was weighing on prices.
Spot gold was at $948.30 as of 0310 GMT, barely moved from New York's notional close of $948.35. On Monday, gold prices rose to a six-week high near $955.00 per ounce. Japanese markets were closed on Monday for a national holiday.
U.S. gold futures for August delivery were also little changed at $948.50 per ounce, compared to $948.80 an ounce on the COMEX division of the New York Mercantile Exchange. The August contract hit a session peak of $955.40, its loftiest level since June 12.
U.S. stocks jumped on Monday, driving the S&P 500 to an eight-month closing high, after CIT Group Inc was thrown a lifeline to avoid bankruptcy, and investors bet corporate America would log another strong set of earnings this week. .N
The dollar hovered near a six-week low against a basket of currencies on Tuesday, after hitting a six-week low against the euro of $1.4250 on trading platform EBS the previous day.
Masafumi Yamamoto, head of FX strategy Japan at Royal Bank of Scotland, said the euro was likely to strengthen further, with a near-term target around $1.43.
"Better-than-expected data and earnings are prompting investors to buy back risk assets, including the euro. Persistent talk of diversifying foreign reserves to include non-U.S. dollar assets is also favorable for the euro," he said.
"In the near-term, recovery in investor risk appetite will likely continue, although there is a chance that a correction of such moves could spur dollar buying at some point," he said.
If the euro continues to strengthen, gold could inch higher.
"The dollar remains an important factor. If the dollar continues to weaken, investors will try to see if gold can hold $955-$960," Leung said.
Investment flows into gold-backed exchange-traded funds were slow, with holdings at the world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, staying unchanged at 1,094.54 tonnes as of July 20, after easing slightly on July 17.
