Gold rose above $1,220 an ounce in Europe on Friday as buyers took advantage of the previous session’s price retreat to buy into the market, with concerns over the economic recovery firmly underpinning prices.
Spot gold was bid at $1,223.55 an ounce at 1434 GMT, against $1,215.80 late in New York on Thursday. U.S. gold futures for August delivery rose $3.70 to $1,225.90.
The precious metal touched a session high at $1,228.20 an ounce after U.S. retail sales data came in lower than expected, temporarily pressuring stock markets, but pared gains as equities recovered after positive consumer sentiment data.
Gold is struggling to make significant headway after hitting a record $1,251.20 an ounce earlier this week, having fallen 1 percent on Thursday as risk appetite recovered and investors worried the market had become overstretched.
“I think gold is going to struggle, provided we don’t get another bout of extreme risk aversion,” said RBS Global Banking & Markets analyst Daniel Major.
“We are going into the weakest period for jewelry offtake, and high and volatile prices in local currencies are likely to compound any seasonal weakness. From that point of view there is not going to be much support from the physical market.”
The euro rose against the dollar on Friday as June U.S. consumer sentiment data came in better than expected, offsetting pressure from a surprise decline in U.S. retail sales in May which earlier dented the single currency.
U.S. stocks trimmed losses on Friday after data showed consumer sentiment improved in early June to its strongest level in nearly 2-1/2 years. Europe’s top shares also recovered mid-afternoon, rising almost 0.75 percent. .EU .N
Sharp falls in equity values and the euro this year had benefited gold as an alternative asset.
“Demand for gold as a safe haven and an alternative currency remains, though maybe not in the heightened way it was a few weeks ago,” said Credit Agricole analyst Robin Bhar.
Strong investment demand continued. Holdings of the world’s largest gold-backed exchange-traded fund, New York’s SPDR Gold Trust, rose 7.6 tons to a record 1,306.137 tons on Thursday.
OPPORTUNITY TO BUY
“This trend shows that medium to long-term investors see further risks on the horizon and view the lower gold price as an opportunity to buy,” said Commerzbank in a note.
However, Indian gold buying remained weak for a fourth day as traders sought lower prices, although a stronger rupee helped make the dollar-quoted asset cheaper for local buyers, dealers said. India is the world’s biggest gold consumer.
From a technical perspective, gold’s consolidation is likely to set it up for fresh gains in the medium term, analysts said.
“Despite the recent weakness, we continue to see pullbacks as counter trend and temporary ahead of a resumption of the larger bulltrend,” said Barclays Capital in a note.
Silver was at $18.21 an ounce versus $18.19, platinum at $1,539.50 an ounce versus $1,534, and palladium at $448.90 against $450.50.
“Other precious metals have started to outperform gold with the gold to silver ratio tumbling below 68 having made highs near 70 earlier this week,” said VTB Capital analyst Andrey Kryuchenkov. “The platinum to gold ratio nudged to 1.25.”
By Sue Thomas
Tags: consumers, european economy, money, precious metal, stock market, us consumer, us retail sales, us stocks, wall street
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