PRECIOUS-Gold extends losses after U.S. data
Wed Mar 28, 2012 2:24pm GM
* Gold prices extend retreat from two-week high
* Momentum from expectations of U.S. monetary easing fades
* Commodities, equities under pressure (Updates prices)
By Jan Harvey
March 28 (Reuters) - Gold prices fell towards $1,670 an ounce on Wednesday, extending the previous day's retreat from a two-week peak, after data showing a smaller-than-expected rise in new U.S. manufactured goods orders lifted the dollar to session highs versus the euro.
Momentum sparked by expectations for further U.S. monetary easing faded after prices failed to breach key resistance at $1,700 an ounce, analysts said.
Spot gold was down 0.3 percent at $1,675.19 an ounce at 1406 GMT, while U.S. gold futures for April delivery were down $9.40 an ounce at $1,675.50.
Spot prices rose as high as $1,696.20 on Tuesday after the Federal Reserve suggested a continuation of easy monetary policy may be necessary to support growth and bring down unemployment, but their rally proved short-lived.
"Notice how 1700/1690 held sturdy," VTB Capital analyst Andrey Kryuchenkov said. "(This is) not a massive pullback, $1,640 will certainly hold for now, but a tad more is possible."
The dollar pushed into positive territory against a currency basket after the goods data at 1230 GMT, exacerbating losses in gold. The metal has a close inverse link to the dollar, weakness in which makes assets priced in the unit cheaper for other currency holders.
A sharp drop in oil prices, under pressure from talk of a release of strategic oil reserves by the United States, and a fall in industrial metals prices, also weighed on bullion.
Activity on the wider markets suggested appetite for assets seen as higher risk was muted. European stocks surrendered early gains and safe-haven German bund futures firmed.
Nonetheless, expectations for a continuation of super-loose monetary policy and ongoing official sector buying is supporting the medium-term outlook for gold.
"I have a positive view of gold from these levels," BNP Paribas analyst Anne-Laure Tremblay said. "Fundamentals are still supportive and we assume some form of monetary policy accommodation to take place in the United States by mid-year."
PRICES STRUGGLE
Physical gold demand has come under pressure this week from an ongoing strike among jewellers in India, the world's largest bullion consumer, who are protesting against a hike in import duty for bullion.
India's Finance Minister said on Tuesday the country will not cut import duty on gold, which it doubled to 4 percent this month, although it is considering jewellers' demands for the removal of a 0.3 percent excise duty on unbranded jewellery.
"The removal of the excise tax may be a step towards meeting some of the grievances listed by Indian jewellers in the wake of the government budget," said HSBC in a note.
"Until the Indian jewellers reopen their shops, Indian gold demand will remain weak. The dip in Indian demand may be partly offset by better Chinese physical demand as Shanghai premiums remain high."
Gold prices have struggled to make new headway after failing to break through the $1,800 an ounce level earlier this month. They remain well off the record high of $1,920.30 an ounce they hit in 2011.
Goldman Sachs said in a report on Wednesday that, as gold prices are closely linked to U.S. real interest rates, they may have been suffering from expectations for stronger growth.
"The gold market may have been expecting that real rates would soon be rising along with improving economic growth, leading to a sharp decline in net speculative length in gold futures," it said.
"As we look forward, our U.S. economists forecast subdued growth and further easing by the Fed in 2012, which should push the market's expectations of real rates back down near zero basis points and gold prices back to our six-month forecast of $1,840 an ounce," it added.
Silver was down 0.2 percent at $32.43 an ounce, spot platinum fell 0.4 percent to $1,640.75 an ounce, and spot palladium was down 0.7 percent at $648.22 an ounce. (Editing by James Jukwey)
http://af.reuters.com/article/metalsNews/idAFL3E8ES5H420120328?pageNumber=3&virtualBrandChannel=0&sp=true
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