Dollar loses steam as US retail sales data disappoint, while investors eye weekend Greek election LONDON — Gold prices rose towards $1625 an ounce on Wednesday, its highest in the week to date, as weaker-than-expected US retail sales data knocked the dollar, keeping market confidence intact after bullion’s move above $1600 in the previous session. Spot gold rallied to a session high of $1624,36, before settling back a touch to $1620,30 by 2.50pm GMT. US gold futures for August delivery gained $8 to $1620,80. US retail sales fell for a second straight month in May. Excluding vehicles, sales showed their biggest decline in two years. At the same time, concerns about Spain and Italy’s debt and uncertainty ahead of Sunday’s Greek election kept the euro zone’s problems on the boil. While gold has failed to react positively to elevated risk in the euro zone, signs that economic jitters are spreading from Europe to the US were proving supportive to prices. The metal rallied on June 1 as poor US jobs data reignited expectations for another round of US quantitative easing (QE), which could undermine the dollar and boost interest in gold as an alternative to volatile currencies. "People are clearly betting that (Federal Reserve chairman Ben) Bernanke may warm towards more QE and implement QE3. It’s a realistic possibility. Maybe what they will do is indicate that the bias has shifted towards doing some QE ... that will be enough to put a floor under the gold price," Société Générale analyst Robin Bhar said. "We’ve had poor non-farm payrolls, poor retail sales data today and a welter of other soft data," he added. In other markets, global stocks fell after the US data, while German Bund futures erased some early losses and Italian bonds came under pressure before Thursday’s crucial bond auction. "So far the financial aid promised to Spanish banks has failed to have its desired effect. On the contrary, the sell-off of Spanish and indeed Italian government bonds continues," Commerzbank said in a note. "The sovereign debt crisis can be expected to keep the markets on tenterhooks for quite some time yet and cause demand for gold to pick up again — not only among retail investors." NEXT BIG LEVEL From a chart perspective, gold is holding near its 50-day moving average at $1613,07. Technical analysts identify the $1640/oz area as the next big level to break for gold. "Only a break above the current June high at $1641 will (put) the 50% Fibonacci retracement of this year’s decline at $1659,07 and the May high at $1672,10 in (gold’s) sights," Commerzbank said in a note. "Below here, the outlook will stay neutral." Kazakhstan, which last week said it planned to boost its gold reserves to 15% of its total gold/foreign exchange holdings, has now announced it will raise that proportion to 20% through the acquisition of 20 tons of gold from the Kazzinc mining corporation and a further 4,5 tons from Kazakhmys. Kazakhstan is one of a number of countries, including Russia, Mexico, Colombia and South Korea, that have built up their official gold holdings in recent years. Most buying has been seen from Asian and emerging-market central banks. Among other precious metals, silver rose a modest 0,3% to $20,08/oz, tracking gains in gold. Spot platinum gained 1% to $1465,74/oz, while palladium added 0,4% at $622,75/oz.

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