Gold got off to a steady start this week in relatively quiet European trade, but with foreign exchange markets governing any moves bullion was expected to continue to gather support from the dollar’s woes, traders said.
As worries over US asset markets and the strength of the US recovery returned to the fore to put the dollar on the defensive on Monday, gold headed above $311 an ounce as subtle buying interest buoyed prices.
”It’s all quite lacklustre this morning. There is some buying interest there but we are at the crucial $312 resistance level and if we go through there then buyers will get nervous, but they won’t panic just yet,” one trader said.
”If more weakness goes into the dollar then yes, it will move higher,” the trader said.
Spot gold rose to $311.40/311.90 in early trade, up almost a dollar from $310.80/311.30 in New York before the weekend.
”Gold will probably take its short-term direction from the currency movements this week with little gold-specific news in the market at the moment,” UBS Warburg analyst John Reade said in a report.
Fears over ongoing tensions in the Middle East continue to be priced into the precious metal which has bounced 18% since the start of this year, traders said.
On Monday Israeli jets carried out mock raids over Lebanese towns for the second consecutive day, exacerbating fears that the conflict could escalate into other areas.
The market is also continuing to draw support from strong gold equities and anti-hedging sentiments from producers.
”Given this, we do not expect a severe meltdown in price prospects simply because the dollar regains its poise. Firmer sentiment in dollar-related assets, however, should take some of the wind out of gold’s sails and bring the $300 an ounce area near into view,” Barclays Capital said in a weekly report.
Elsewhere, platinum prices held steady after having shed nearly $40 from the high of $560.00 just three weeks ago over recent sessions.
The market appeared to shrug off news on Monday that a looming strike at South Africa’s platinum producer Anglo American Platinum (Angloplat) over a new medical aid scheme might be averted.
Although some traders said the news could be bearish for the market, others dismissed it as having little significance.
”It does not matter if there is a strike or not. There is enough stockpile out there to absorb a strike. It won’t harm production or liquidity,” one trader said.
The National Union of Mineworkers threatened to embark on a strike in mid-May at all sections of the world’s largest platinum producer, over a dispute over a new medical aid scheme unilaterally imposed on the group’s employees.
At 1002 GMT, platinum was at $523/528 against $522/529 in New York. Palladium was at $347/357, versus $349/364 previously.
Silver looked like consolidating around current levels after last week’s tightness in the borrowing market eased, and was last quoted at $4,67/4,l69 against $4,66/4,68 before the weekend in New York. – Reuters