Gold steady below one-month low; investors on sidelines

By Rujun Shen
SINGAPORE (Reuters) - Spot gold held steady on Wednesday just below a one-month low hit in the previous session, as investors stood on sidelines of a market with no clear trend for the short term, and with technical resistance seen around $1,375. Inflation concerns continued to grow, as China reported elevated, albeit weaker-than-expected, consumer price index data for January, and inflation in Britain jumped to twice the Bank of England's target in January.

Rising price pressure has stoked fears that central banks might turn increasingly hawkish on interest rates, which could hurt sentiment in gold. Spot gold edged up at $1,374.60 an ounce by 0703 GMT. It hit a four-week high of $1,376.50 on Tuesday. U.S. gold futures was steady at $1,375.20. "We are seeing inflation rise globally," said Darren Heathcote, head of trading at Investec Australia, "The bullish trend is intact, although we'll see periods of weakness." Technical analysis showed that spot gold is expected to rise into the $1,385-$1,390 range, as an uptrend has been established while the contract climbs within a rising channel, said Reuters market analyst Wang Tao.

For a 24-hrs gold technical outlook: http://graphics.thomsonreuters.com/WT/20111602095131.jpg If gold could stand firmly above the key resistance level around $1,375, it could move towards $1,400, traders said. "It's been quite a bounce, but there is some technical resistance right around here and we've seen a bit selling to take profit," said a Singapore-based trader. "I do think the story is intact. Just right now, it's not particularly compelling." Holdings in the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, slipped to 1,224.008 tonnes by February 15, its lowest since May last year.

The unfolding political unrest in Middle East nations continued to attract attention of global investors. If the situation deteriorates, investors could buy more of safe-haven assets such as gold. Still, some market players said the influence on the gold market might be insignificant. For a factbox on protests in Middle East and North Africa, click Spot palladium was steady at $835.50 an ounce, after touching a ten-year high of $847 in the previous session. Spot silver edged down 0.2 percent at $30.70.

The gold-silver ratio, used to measure how many ounces of silver is needed to buy an ounce of gold, rebounded from a five-year low of 44.47 hit on February 14 to 44.76.

First Published: 2011-02-16 07:35:20
Updated 2011-02-16 09:39:31