[miningmx.com] — SPOT gold edged higher on Monday as healthy physical demand helped buoy prices, while China’s move to further tighten its monetary policy and upbeat US economic data weighed on sentiment.
China raised cash reserve requirements for banks on Friday, as the country’s inflation soared to a 28-month high in November and put pressure on the government to step up efforts to curb inflation.
“There’s the possibility that China would tighten its monetary policy further,” said Ong Yi Ling, an analyst at Philip Futures.
“It could affect demand for commodities, and gold could be caught in a sell-off.”
The dollar edged higher against a basket of currencies, supported by higher Treasury yields after improving US data late last week.
A rise in US consumer confidence to its highest in six months and a much bigger-than-expected contraction in the country’s trade deficit pointed to a firmer economic recovery on Friday.
Spot gold gained by 0.3% to $1,387.25 an ounce, after falling by 2.2% last week.
US gold futures edged up 0.2% to $1,388.2 an ounce.
Spot gold is biased to fall even though it is rangebound between $1,371 to $1,395 per ounce, said Wang Tao, a Reuters market analyst.
Robust physical demand in the region helped support prices, dealers said.
“The physical market is very good. Bullion traders and some jewellers are buying, as well as some individual customers who prefer to sell currency and buy gold,” said
Peter Fung, head of dealing department at Wing Fung Precious Metals in Hong Kong.
India and China have both shown strong appetite, due to seasonal rise in demand, he added.
Investors are eyeing a Federal Reserve meeting on Tuesday to see whether the proposed $600bn stimulus plan would be carried out, or if further stimulus would be considered to jump-start the economy.
“If the Fed hints further quantitative easing, it would provide some bullish support to gold,” said Ong of Philip Futures.
“On the longer term, some investors could be buying on dips, which also provides support to prices.”
Strength in the industrial metals encouraged platinum group metals.
Spot platinum rose 1.3% o $1,686.74 an ounce, and palladium gained 1.4% to $738.22.
Prices of platinum have plenty of scope to build on the 15% rise already seen this year, based on their historic relationship with silver.
