Gold is heading for its first monthly gain since October despite initial losses in intraday trade on Thursday on lingering worries about the euro zone crisis just as debt-hit Cyprus reopened banks for the first time in two weeks. Copper hovered around the lowest in a week on Thursday,partly because of sluggish demand from top consumer China while brent crude held steady near $110 a barrel on expectations of a revival in demand in the US after an unexpected fall in product inventories.
Gold is on track for a 1.3% rise in March its first monthly rise in six as worries flared up about the stability of the euro zone,stoked by the crisis in Cyprus and a political deadlock in Italy after inconclusive elections in February.
Gold lost 0.3% at $1,600.01 an ounce by 1200 GMT on Thursday,but would still rise on a monthly basis,thanks to gains earlier in March. US gold futures for April delivery shed 0.2% at $1,602.60 an ounce. Although euro zone leaders said the bailout package with Cyprus averted a national bankruptcy that might have forced the country out of the bloc,analysts have expressed concern that the deal may push the troubled nation deeper into an economic slump.
The precious metal also got support from comments of US Federal Reserve officials,reiterating that the central bank would do best to keep buying assets at its current $85-billion-a-month pace until the jobs market is on firmer ground. This means liquidity would remain adequate in the system,likely keeping price pressure within the economy alive and auguring well for gold,which is considered a hedge against inflation.
However,gold-backed exchange-traded funds are set for their biggest quarterly outflow since inception,with investors beating a hasty retreat from the market due to a brightened global economic backdrop,according to Reuters. Holdings in the eight gold-backed exchange traded products (ETPs) tracked by Reuters are down by 7.2% to 70.66 million ounces this year. Other gold products such as the Comex Gold Trust also reported a quarterly decline of 241,548 ounces,it said. This means some fund houses are still betting on risky assets,including equities.
Crude oil rose in intraday trade on Thursday on hopes a revival in US demand,although debt worries in Europe weighed. Brent crude oil gained 17 cents to $109.86 a barrel by 1030 GMT while US crude oil increased 16 cents to $96.74. US gasoline and distillates stocks dropped sharper than anticipated last week even as refinery runs increased,data from the Energy Information Administration showed,suggesting stronger domestic energy demand.
However,copper fell as Chinese buyers adopted caution. Three-month copper on the London Metal Exchange dropped 0.14% to $7,596.25 a tonne intraday,adding to the previous session\’s fall. Prices are set to end the week with losses of almost 1%.
BACK TO GLORY?
* Gold is on track for a 1.3% rise in March as worries flare up about the stability of the euro zone
* It also got support from comments of US Fed officials,who reiterated the bank would do best to keep buying assets at its current $85-bn-a-month pace until the jobs market is on firmer ground