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Gold steadies at $1,290/oz, heads for 2nd weekly drop

May 09 2014, 15:50 IST
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SummarySpot gold was at $1,289.10 an ounce at 0957 GM, little changed from $1,289.00 late on Thursday

Gold held steady around $1,290 an ounce on Friday, underpinned by strong chart support, but remained on track to fall for a second week as the dollar took support from euro weakness and traders awaited further news on Ukraine.

The dollar extended gains against the single currency after posting its biggest one-day drop in nearly two months on Thursday, as investors positioned for more monetary stimulus from the European Central Bank.

Spot gold was at $1,289.10 an ounce at 0957 GM, little changed from $1,289.00 late on Thursday, while U.S. gold futures for June delivery were up $1.40 an ounce at $1,289.10. The metal has found solid support at its 100-day moving average at $1,287 an ounce, dealers said.

"With a lack of any particular news on the economic front, and with the tensions in Ukraine having declined from the elevated levels we've seen recently, the market is searching for direction, stuck in a range either side of $1,300," Mitsubishi analyst Jonathan Butler said.

"The long-term trend is still downwards for gold," he added. "If we see a convincing breach and a close below $1,280, that will confirm the trend, and we might go on to re-trace back down to the $1,240s."

The metal rallied to three-week highs on Monday on the back of elevated tensions in Ukraine, but it failed to maintain those gains after Russian president Vladimir Putin said he was willing to negotiate with European officials over the crisis.

Pro-Moscow separatists in eastern Ukraine ignored a public call by Putin to postpone a referendum on self-rule, however, declaring they would go ahead on Sunday with a vote that could lead to war.

European shares eased, but are expected to be underpinned by expectations that the ECB could employ new measures, such as a rate cut, to support the region's economic recovery.

READY TO TAKE ACTION

ECB president Mario Draghi said on Thursday that the bank was ready to take action next month to boost the euro zone economy if updated inflation forecasts merited such a move.

"Our European economists are now calling for the ECB to cut rates across the whole interest rate corridor in June by 15 bps," UBS said in a note. "For gold, this has a negative read-through, principally through the FX impact."

"It's one further variable... that will encourage weaker sentiment towards the yellow metal."

Interest in gold was muted overnight in Asia, the leading market for physical gold. China had some mixed interest early

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