TOKYO – Gold clawed back above $930 an ounce on Tuesday, after falling by more than $30 from last week’s peak of $965 on a rally in the dollar, which had led to a shift of funds out of commodities.
While light physical buying has stopped gold’s fall at around $925, investors are cautious about buying aggressively given renewed weakness in global stock markets and after the euro hit its lowest level in almost a month against the dollar.
Gold had risen to $932,10 an ounce by 0542 GMT, up 0.5 percent from New York’s notional close of $927,85. It was down 3,4 percent from last week’s peak of $965,25.
Earlier this month, bullion rose towards $1 000 an ounce on investment demand and on its appeal as a hedge against a falling U.S. dollar.
U.S. gold futures for August delivery were at $933,4 an ounce, up 0,6 percent from Monday’s settlement on the COMEX division of the New York Mercantile Exchange.
“Dropping down from $965 is a fall of $40, and you need a little support there,” said Ronald Leung, a director of Lee Cheong Gold Dealers in Hong Kong.
If the dollar stabilizes further, gold could test the $915-$910 level as physical buying would only scale up if and when it falls below $900, he said.
The dollar rose versus the euro on Tuesday after the European Central Bank said euro zone banks will probably need to write down another $283 billion.
But against the yen, the U.S. currency lost ground for the second straight day as a slide in global stocks encouraged caution on the global economy, prompting investors to cut bets on riskier assets.
Japan’s Nikkei stock average fell 2,9 percent on Tuesday, its biggest one-day percentage loss in over two months, with shares sold across the board on growing investor caution about the global economy as the yen advanced.
“Bearish stock markets usually make people cautious about gold and keep them from building fresh long positions,” said Kaname Gokon, deputy general manager in Okato Shoji Co’s research section.
As expected, the Bank of Japan kept interest rates on hold at 0,1 percent after its two-day policy review on Tuesday.
The U.S. Federal Reserve’s policy meeting next week will likely provide further clues on direction in the dollar and gold markets, traders said.
“You have to see what statements the Fed makes about the economy and whether its policy of relaxation is still going or not,” said Leung at Lee Cheong Gold Dealers.
Investor demand for gold as an alternative asset class remained weak. Holdings of the SPDR Gold Trust, the world’s largest bullion exchange-traded fund, were steady at 1 132,15 tonnes as of June 15, unchanged since June 5.