Gold inched up on Tuesday,struggling to break above a recent range as an improved economic outlook and a stocks rally capped sentiment for the precious metal,though physical buying in Asia lent some support.
Investors continued to pull out of gold-backed exchange-traded funds,drawn by a record-setting rally in equities,while gold dipped after 12 years of continuous climb as an improving economic picture dented safe haven interest.
The Dow industrial average hit a record high for the fifth consecutive session on Monday and posted a gain of 10.3 percent this year,overshadowing spot gold’s 5.3 percent loss.
But gold’s fall was cushioned by worries over the U.S. budget crisis,which some see as a threat to the nascent recovery in the world’s top economy,as well as the troubles in the euro zone and bargain hunting in the physical gold market in Asia.
“We still see consistent physical demand from China,” said Peter Fung,head of dealing at Wing Fung Precious Metals in Hong Kong.
“The market is still stuck. On the downside we see short covering and on the upside people are liquidating positions to take profit.”
Spot gold edged up 0.2 percent to $1,583.36 an ounce by 0327 GMT. The metal has been trading between $1,560 and $1,585 since the start of March.
U.S. gold was up 0.3 percent at $1,582.60.
Technical signals on spot gold were neutral,said Reuters market analyst Wang Tao.
Highlighting waning interest from Western investors,holdings of SPDR Gold Trust,the world’s biggest gold-backed exchange-traded fund,dropped to 1,236.729 tonnes on March 11,the lowest since October,2011.
The dollar held near a seven-month high hit last Friday,but gold has not buckled under the strength of the greenback,which usually weighs on commodities priced in dollars by making them more expensive to buyers holding other currencies.
“It’s surprising to see gold holding up under a rising dollar,which partly reflects the robust demand in physical metal in Asia,” said a Shanghai-based trader.