Gold prices firm on Asia buying, upbeat US data weighs
Gold firmed on Monday, bouncing from a one-week low hit on Friday, supported by physical buying in Asia, but robust U.S. economic data dented bullion's safe-haven appeal.
Automatic spending cuts that kicked off in the United States on Friday, pushing spot gold to its lowest level in more than a week, also continued to weigh.
"The broad theme might be gold-negative, because the spending cuts are probably taking away a bit of the froth on the idea that policymakers are spending out of control and they will keep doing so until the recovery takes hold," said a Hong Kong-based trader.
Investors are waiting to see the impact of the spending cuts, known as the "sequester". Although the $85 billion cuts, a fraction of the U.S. government's total spending of $3.7 trillion, are unlikely to become a huge drag on the economy. Vigorous U.S. manufacturing data, together with strong auto sales and a rise in consumer sentiment in February, suggested a pickup in economic growth, tempering interest in gold.
Recent weakness in the global market has triggered physical buying interest in Asia, particularly in China, as the spread between onshore prices and international prices widens, cushioning the fall in dollar-priced gold.
The popular gold forward contract on the Shanghai Gold Exchange was trading at 319.9 yuan a gram by 0324 GMT, or $1,599 an ounce, about a $20 premium to spot gold.
"Most likely we will see banks bringing the metal onshore to take advantage of the wide
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