London: Gold firmed on Friday, helped by a recovery in assets seen as higher risk, like stocks, the euro and other commodities, after stronger-than-expected German economic data and on concerns that this week’s selling may have been overdone.
European stocks recovered from two-week lows, Brent crude rebounded after falling 2 per cent in the previous session, and copper prices bounced from Thursday’s two-month low.
Spot gold was up 0.4 per cent to $1,581.26 an ounce by 1043 GMT, but stayed on course for a weekly decline of 1.5 per cent, its second week in the red.
The metal fell to a seven-month low of $1,554.49 an ounce on Thursday after minutes from the Fed’s latest policy meeting triggered worries the central bank might stop or slow its bond buying programme.
“What we are seeing today is just a bit of rebound on the back of the very sharp correction that we saw in the past few days in gold and other commodities,” Danske Bank analyst Christin Tuxen said.
“In the short term, political uncertainty in the Eurozone with the Italian elections and the US automatic spending cuts that are due to kick in on March 1, could potentially give gold a little tailwind.”
In the United States, unless Congress reaches a deal, about $85 billion (Dh312 billion) in across-the-board government spending cuts will kick in starting next month in a process called sequestration.
Thursday’s data on employment, manufacturing and consumer prices pointed to a still tepid recovery in the US economy, suggesting the Federal Reserve will have to continue its monetary easing policy.
Easy global monetary policy has helped gold rally in the past few years as investors, worried about currency debasement and inflation as a result of money printing by central banks, sought refuge in the precious metal.
Bargain hunting by investors of physical gold in Asia also helped lift prices, analysts said, although this will likely struggle to offset weaker interest elsewhere.
“It remains to be seen if the ongoing rebound will be sustained with the help of physical buyers,” broker VTB Capital said in a note. “However, we do not think damaged investor confidence can be restored this quickly.”
ETFs liquidation continues
Investors continued to bail out of SPDR Gold Trust this week, depressing prospects of significant price gains, analysts said. The fund is on track for its biggest weekly outflow since August 2011.
The world’s biggest gold-backed exchange-traded fund reported that holdings dropped 8.89 tonnes on February 21 to 1,290.306 tonnes, the lowest in more than five months. In the previous session, holdings slumped more than 20 tonnes, its biggest one-day drop in 18 months.
Platinum and palladium, this year’s best performing precious metals, moved higher after posting hefty losses on Thursday.
Spot platinum rose 0.5 per cent to $1,619.24 an ounce, after prices fell 3 per cent to a five-week low of $1,593.45 in the previous session. Palladium was up 1.1 per cent at $736.50 an ounce, having fallen to a one-month trough of $707.22 on Thursday.
Switzerland remained a net exporter of platinum group metals (PGMs) in January, with 1,303 kilograms of platinum and 1,437 kilograms of palladium shipped out of the country.
The figures were well down on December’s numbers but contrast sharply with last January’s trend, when Switzerland was a net importer of both metals.
Spot silver rose 0.6 per cent to $28.81 an ounce.