Mon May 07 2012
Gold edged lower on Monday,
pressured by a stronger dollar after elections in France and Greece
demonstrated strong anti-austerity sentiment and raised questions on whether
the euro zone will be able to battle the debt crisis. The euro hit a three-month
low against the dollar, and the greenback rose to a three-week high versus a
basket of currencies, making dollar-priced commodities less attractive to
buyers holding other currencies.
Socialist Francois Hollande
ousted Nicholas Sarkozy in the French presidential election and Greece's
pro-bailout ruling parties suffered big losses, sending the message that the
new governments might push back German-led austerity measures seen crucial to
solving the bloc's debt crisis. Though sluggish US jobs data on Friday to a
certain extent added to hopes for more monetary stimulus, which would benefit
gold as an inflation hedge, analysts said imminent quantitative easing is
unlikely.
"We really need to see the
economy much weaker before the central bank steps in," said Dominic
Schnider, head of commodity research at UBS Wealth Management in Singapore. "For
now the market is in risk aversion mode. With inflation threat out, oil prices
coming off and QE hurdles really high in developed economies, gold is in a
vulnerable position."
Spot gold inched down 0.2 per
cent to $1,638.66 an ounce by 0603 GMT, off the low of $1,626.50 hit on Friday.
US gold lost 0.4 per cent to $1,639.30. Activities in Asia's physical gold
market slowed down, with buyers moving back to the sidelines after picking
bargains when prices dropped below $1,630 last week, dealers said.
"We see a little physical buying today, but the uncertainty in the euro zone after the leadership changes in France and Greece keeps buyers cautious," a Hong Kong-based dealer said. Speculators raised long bets in gold to the highest level since early April in the week of May 1, but reduced their silver net long positions to the lowest level since early January, the data from the US Commodity Futures Trading Commission said.
Source: Reuters