Gold prices hovered near their two-week high above $1 400 on Wednesday as lacklustre economic data from the United States burnished the metal’s safe-haven appeal, while bullish forecast for next year helped keep the market sentiment buoyant.
Latest US data, showing consumer confidence unexpectedly deteriorated in December and prices of single-family homes fell almost double the expected pace in October, was at odds with other signs suggesting recovery was accelerating in the world’s largest economy.
“The US economy outlook and monetary policy is a key factor that influences gold prices. We’ve seen data alternate between good and bad, showing that the economy is recovering, but without a strong momentum yet,” said Hou Xinqiang, an analyst at Jinrui Futures based in China.
Hou expected gold prices to be range- bound with a strong support level at $1 360 in the short term, before they rally in the coming year.
Spot gold was flat at $1 405,51 an ounce by 0638 GMT, after hitting a two-week high of $1 406,75 in the previous session. US gold futures edged up nearly $1 to $1 406,6 an ounce. Trading on the physical market was thin, as most market players were away on holidays, dealers said.
“Yesterday we saw some selling around $1 385, and today the market is quieter than the past two days,” said a Singapore-based dealer.
“Jewellers are not buying at such price levels. It’s investors and hedge funds that would buy, betting on further price rally,” said a Singapore-based dealer, adding that among other factors, the uncertainty around the euro zone’s sovereign debt crisis, would continue to support gold.
US Treasury yields inched up in Asia on short covering after a jump on Tuesday, on growing safe-haven appetite that tends to benefit the bullion as well. The dollar index was steady, after bouncing from a 1- week low on Tuesday.