Gold inched up on Wednesday,rising for a second day with the support of a stronger euro as concerns about the bloc’s debt crisis eased after Moody’s affirmed Spain’s rating and German business sentiment improved.
The euro rose to a one-month high and the dollar index dropped to its lowest in nearly two weeks,reflecting a pick-up in risk appetite after Moody’s Investors Service affirmed Spain’s investment grade.
A weaker greenback makes dollar-priced commodities more attractive for buyers holding other currencies.
In the United States,the latest data showed the world’s largest economy still faces challenges,suggesting to investors that economic growth was not strong enough for the Federal Reserve to curtail its stimulus measures.
Things are improving a little bit,but we are heading towards significant headwinds in the global economy,said Jeremy Friesen,commodity strategist at Societe Generale in Hong Kong.
Friesen said more risks await down the road,including the looming fiscal cliff in the United States with about $500 billion worth of tax increases and more than $100 billion in government spending cuts due to kick in on Jan. 2.
But gold is likely to go through a period of consolidation after a recent run to nearly $1,800,waiting for more stimulus measures from central banks around the world,which will benefit bullion as a hedge against inflation that some investors fear may result from rampant cash printing,he added.
Spot gold added 0.2 percent to $1,750.40 an ounce by 0259 GMT,extending a 0.7-percent rise the previous session.
U.S. gold gained 0.3 percent to $1,751.70.
On the technical charts,Fibonacci retracement analysis suggested that spot gold is expected to rebound into a range of $1,762 to $1,770 an ounce,Reuters market analyst Wang Tao said.
Investors will be watching for more economic numbers due later this week,including U.S. housing market data as well as China’s third-quarter gross domestic product figure. Weak data would be considered likely to point to stimulative policies that could be supportive for gold.
The euro zone debt crisis remains in focus. Although Spain appears out of danger for now,Greece’s talks with its international lenders on austerity measures were suspended briefly over thorny labour issues.
The outlook for more monetary easing around the world and uncertainty over the global economic outlook have kept investor interest buoyant towards gold.
Holdings of gold-backed exchange-traded funds edged down to 74.776 million ounces by Oct. 15 compared with the previous session,but were not far off a record high of 75.03 million ounces hit last week.