Gold near $1 075 an ounce as firmer US dollar caps gains

10. February. 2010
Reuters

Gold was little changed in Europe on Wednesday as a slight recovery in the dollar kept a lid on gains, with traders awaiting more details of a possible bailout package for Greece to give fresh direction to the markets.

Spot gold was bid at $1 076.15 (R8 297) an ounce at 12:01 SA time, against $1 076.95 late in New York on Tuesday.

US gold futures for April delivery on the COMEX division of the New York Mercantile Exchange eased 90 cents to $1 075.80 an ounce.

Richcomm Global Services senior analyst Pradeep Unni said gold's heavy losses had introduced a weaker note in gold's technical position last week which persisted.

But he added: "The market is gaining momentum on hopes that Germany will provide loan guarantees in an effort to calm fears of a massive government default which has been directly undermining the strength of the euro-zone and its currency."

"Gold's upside potential clearly seems to be capped, with rallies likely to be used as fresh selling opportunities," he said.

"Expect pent-up physical demand to emerge on a price dip below $1 050."

The euro inched lower on Wednesday, relinquishing some gains made the previous day as the market braced for a European Union summit, speculating that member countries may help Greece tackle its fiscal problems.

The markets are also awaiting Federal Reserve Chairman Ben Bernanke's testimony before the House Financial Services Committee hearing on unwinding Federal Reserve liquidity programmes at 5pm SA time.

The dollar rose last week versus the euro as worries over the health of some euro zone economies hurt the single currency.
 
Strength in the US unit curbs gold's appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.
 
OIL SLIPS

Among other commodities, oil fell towards $73 a barrel, weighed down by worries about weak demand in the world's top consumers after data showed a large build in US crude inventories and a fall in Chinese imports.

On the wider markets, world stocks rose and European shares were led higher by financial stocks as sentiment improved on signs the European Union may arrange a bailout for troubled Greece. But traders remain nervous.

"As yet, optimism has not proven sufficient to tip the balance...in favour of risk trades, and there is an understandable degree of nervousness that the Greece 'solution' will prove underwhelming," said Credit Agricole CIB in a note.

"So, it looks like a day of treading water until we get new disclosures regarding Greece."

On the physical side, Indian gold demand tailed off as prices recovered, while holdings of the SPDR Gold Trust exchange-traded fund were unchanged.

Among other precious metals, silver was at $15.46 an ounce against $15.41, platinum at $1 496 an ounce against $1 502, and palladium at $410.50 against $415.

"Key near-term support is seen from seven-month trendlines in palladium and platinum at $386 and $1 468, respectively," Barclays Capital said in a note.

"Breaks here would likely prove to be the catalyst for the next leg of precious metal weakness."