Gold heads into 2012 with final quarter loss

[] — SPOT gold is ending 2011 on a weak note after 10 straight annual gains, heading for its first quarter of losses in more than three years and a new year likely to be dominated by worries about economic growth and
sovereign debt.

Industrial metals and equities rose in the last trading day of the year, but concerns about the euro zone debt crisis and global growth will remain the focus of the market in the new year.

Spot gold was headed for a 10% gain for the year, but the precious metal is down nearly 19% from a record $1,920.30 hit in September.

The most-active US gold futures contract gained 1.5% to $1,563.50 by 07:30 GMT, snapping six straight sessions of losses.

Spot gold rose 1% to $1,561.89, on course for a weekly decline of 2.9%. It was headed for a monthly loss of 10.5%.

“There was buying interest from Shanghai when the market opened there,” said Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong.

The active Shanghai gold forwards opened at 312.45 yuan a gram ($1,537.8 an ounce), about $14 below spot gold prices. But the gap quickly closed and Shanghai gold stood at 319.50 yuan, or $1,577 an ounce, later in the day.

The Lunar New Year in about three weeks will help support gold consumption in China, traders said.

Technical analysis suggested that spot gold could rebound to $1,588 during the day, said Reuters market analyst Wang Tao.

The 20-day moving average crossed below the 200-day moving average for the first time since 2009, forming what some analysts call a “death cross”, but others said gold is facing a lengthy consolidation phase rather than a bear market.

“A negative crossover in moving averages can be seen as a selling signal,” said Tim Riddell, head of ANZ Global Markets Research, Asia.

“But in gold’s profile, it is probably a confirmation signal that gold has made a cyclical high in the third quarter, and will likely see a more protracted consolidation phase than the market would initially wish to see.”

Riddell said prices could further correct to the $1,425 to $1,450 level, the 38% Fibonacci retracement level on the rally that started in late 2008 and peaked in September.

Concerns about the euro zone debt crisis continued to weigh on the single currency after Italy’s bond auction failed to attract much buying interest and the European Central Bank had to step in and buy Italy’s bonds in an effort to slow rising yields.

On the other side of the Atlantic, US employment, housing market and manufacturing data pointed to growing momentum in the world’s largest economy.

The dollar index edged lower, after rising to its highest in more than 11 months in the previous session.

A pricier dollar weighs on gold and other commodities as it makes them more expensive for buyers holding other currencies.