Gold took a breather on Wednesday after a three-day winning streak but held near its highest in three weeks as investors sought safety in the metal amid a tumble in global equities.
Stock prices fell in global markets on Tuesday, stuck in a dismal start to 2015 on concerns over tumbling oil prices and Greece’s possible exit from the euro zone.
Gold holds its gains- at $1215/ounce now. If the resistance at $1220 is crossed, it could move up a little further
— Rajalakshmi Nirmal (@crajalakshmic)
January 7, 2015“Gold prices (are) continuing their rally spurred by strong investor demand for the bullion as a safe haven asset amidst the political uncertainty in Greece,’’ ANZ analyst Victor Thianpiriya said.
There is increasing speculation that Greece might exit the euro zone if a left-wing party that wants to cancel austerity measures and a part of the Greek debt wins the January 25 elections as widely expected.
Spot gold eased 0.3 per cent to $1,215.40 an ounce by 0333 GMT, after jumping over 1 per cent overnight to $1,222.40 — its highest since December 15.
Yen, government bonds
Other safe-haven assets such as the Japanese yen and government bonds also got a boost from the flight to safety.
Gold’s near-term resistance for the closing price is expected at $1,220, technical analysts at ScotiaMocatta said, adding that a close above that level would shift the focus to further gains, with a target of $1,250.
US economic data
Softer-than-expected US economic data on Tuesday also added to gold’s appeal as an alternative investment.
Growth in the US services sector braked in December and new orders for manufactured goods fell for a fourth straight month in November.
Gold’s gains come despite a stronger dollar, which typically hurts the metal as it makes bullion more expensive for holders of other currencies, and softer oil prices that reduce gold’s appeal as a hedge against oil-led inflation.
Dollar at 9-year high
The dollar was trading close to a nine-year peak against a basket of major currencies, while oil prices were stuck near five-and-a-half year lows.
Doubts over gold’s rally persisted, as seen in the holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund that fell 0.42 per cent to 707.82 tonnes on Tuesday to a fresh six-year low. Investors will eye key economic data due from Europe and the United States later in the day for cues.