Gold price rises to 5-week high
GOLD climbed to its highest in five weeks on Tuesday as German data boosted the euro after several sessions of losses, and as stocks and commodities were lifted by Chinese trade data, which was seen likely to prompt pro-growth measures by Beijing.
The precious metal later eased back below $1,660 an ounce as the euro came under pressure from news the European Commission will take legal steps against Hungary over laws governing its central bank and others, but remained firmly supported.
Spot gold was up 0.8 percent at $1,656.90 an ounce at 1451 GMT, having earlier peaked at $1,667.41, while US gold futures were up $26.60 an ounce at $1,657.40. Prices are up 5.9 percent this year after falling 10 percent in December.
“The issues that have been supportive of gold — the debt crisis, quantitative easing, lack of economic growth in Europe — should all still be there,” said Citigroup analyst David Wilson. “When we got down to $1,520, $1,530 (in December), you had to think, this is a good point to buy in.” “There are good reasons to see support for gold. There seems to be more confidence in gold at the moment,” he added. While gold’s rise since the start of the year has occurred without the benefit of a weaker dollar, it extended gains on Tuesday as the euro rose versus the US unit.
The euro hit the day’s high versus the dollar after a strong reading of German business sentiment suggested the eurozone’s largest economy was improving despite the bloc’s debt crisis.
It is still down on the year, however, and the outlook for the single currency remained negative after Standard & Poor’s downgraded the eurozone’s EFSF bailout fund by one notch to AA+ following multiple eurozone downgrades on Friday.
Elsewhere, stocks and commodities rose after data showed China’s economic growth in the latest quarter beat expectations but was still its weakest in 2-1/2 years, potentially heralding fresh pro-growth measures from the government. “The property slowdown has gathered speed and property investment growth slowed sharply to only 12 percent year-onyear in December,” said Societe Generale analyst Yao Wei.
“New property starts slowed all the way to only 0.9 percent year-on-year. It indicates that in Q1 2012 the numbers will be very unpleasant. Policy easing will continue.” Gold may set a record high above $2,000 an ounce in late 2012 or early 2013, but the metal is nearing the end of a decade-long run that has lifted prices by more than 600 percent, metals consultancy GFMS said on Tuesday.