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Gold price heads for longest run of monthly drops in 16 years

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Gold price sank nearly 1 per cent in the previous session, wiping out Tuesday's gains. (Reuters) Gold price sank nearly 1 per cent in the previous session, wiping out Tuesday's gains. (Reuters)
SummaryGold price sank nearly 1 per cent in the previous session, wiping out Tuesday's gains.

Gold traded little changed on Thursday, but was headed for its longest stretch of monthly declines in more than 16 years as its safe-haven appeal has dimmed with the global economy showing signs of recovery.

It sank nearly 1 percent in the previous session, wiping out Tuesday's gains that were fuelled by U.S. Federal Reserve Chairman Ben Bernanke's reassurance of the bank's monetary stimulus programme.

FUNDAMENTALS

Spot gold traded little changed at $1,597.60 an ounce by 0048 GMT, on course for a monthly decline of 4 percent. It has been in the red for five straight months, the longest such losing streak since late 1996 to early 1997.

U.S. gold inched up 0.1 percent to $1,597.80.

Holdings of SPDR Gold Trust, the world's biggest gold-backed exchange-traded fund, dropped to a more than six-month low of 1,258.4 tonnes on Feb. 27. The holdings had been falling for seven sessions straight, marking the longest losing run since the fund was incepted in 2004.

The U.S. jobless rate is unlikely to reach more normal levels for several years, Federal Reserve Chairman Ben Bernanke said on Wednesday as he defended the central bank's monetary stimulus in the second day of testimony in front of the Congress.

U.S. economic data was upbeat. A gauge of planned U.S. business spending recorded its largest increase in more than a year in January, suggesting growing confidence in the durability of the economic recovery.

Solid demand for Italy's first bond auction since the inconclusive election soothed fears that the political deadlock could destabilise Europe's second-largest sovereign debt market, though Italy's borrowing costs rose to their highest in four months.

Positions hardened on Wednesday between U.S. President Barack Obama and Republican congressional leaders over the budget crisis even as they arranged to hold last-ditch talks to prevent harsh automatic spending cuts beginning this week.

MARKET NEWS

U.S. stocks rose on Wednesday, with major indexes posting their best daily gains since early January, as Federal Reserve Chairman Ben Bernanke remained steadfast in supporting the Fed's stimulus policy and data pointed to economic improvement.

The euro held its ground against the dollar and yen on Thursday, with euro bulls taking heart after a relatively smooth auction of Italian government bonds helped ease worries about the country's inconclusive election.

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