Gold price hits nearly 2-week low as economic data saps demand

Jan 25 2013, 10:15 IST
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Spot gold fell to $1,663.11 an ounce, its lowest in nearly two weeks. (Reuters) Spot gold fell to $1,663.11 an ounce, its lowest in nearly two weeks. (Reuters)
SummarySpot gold fell to $1,663.11 an ounce, its lowest in nearly two weeks.

Gold hit its lowest level in nearly two weeks on Friday, after upbeat data from the world's top economies suggested a global recovery is gaining traction, sapping demand for the metal.

Spot gold is the only precious metal in the red so far this year, down 0.4 percent from the end of 2012, while precious metals with industrial applications, including silver, platinum and palladium, have all risen in tandem with investor confidence in the economy.

Manufacturing in China and the United States grew this month at the fastest pace in about two years, while data suggesting German growth picked up boosted hopes for a swifter euro zone recovery.

Together with data showing a five-year low in U.S. jobless claims last week, the data sent Standard & Poor's 500 index to a seven straight session of gains on Thursday. "It now seems that the stronger tone in global equity markets, coupled with a notable easing in European and US market tensions, is leading to short-term pressure on gold," said Ed Meir, an analyst at INTL FCStone, in a research note.

"We think (this) will continue for a little while longer given that negative chart picture are also contributing to the sloppier tone," he said.

Spot gold fell to $1,663.11 an ounce, its lowest in nearly two weeks. By 0320 GMT, it pared losses to trade flat at $1,667.44, headed for a weekly decline of nearly 1 percent, its sharpest loss in about a month.

U.S. gold inched down 0.2 percent to $1,667.30.

Though the 200-day moving average, at just below $1,663, provided some support for spot gold, technical analysis suggested that prices could test the lower level of $1,661, and possibly ease to the Jan. 4 low of $1,625.79 over the next four weeks.

The price slump has triggered some physical buying interest, but many buyers were holding the purse strings on the sidelines of the market, with hopes that prices would further decline.

"There aren't too many orders, because prices are not low enough," said a Singapore-based dealer, expecting a further drop to $1,635 level to be a bigger draw to buyers. Supportive of gold prices, Russia's central bank said it will continue to buy gold as it seeks to diversify its foreign reserves

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