Gold futures have closed slightly lower after a volatile session that saw investors weigh higher oil prices against signs of weakness in the US economic recovery.
Gold for April delivery, the most actively traded contract, closed 0.2 per cent, or $US2.30, lower at $US1,276.90 a troy ounce on the Comex division of the New York Mercantile Exchange.
Investors had been buying gold in recent sessions after crude-oil prices tumbled and spurred concerns about how lower energy costs would affect global markets. Some traders view gold as a haven from political and economic turbulence, believing it will keep its value better than other assets.
But the US benchmark rose as much as 4.8 per cent on Monday, sapping investor appetite for haven assets.
"The rally in oil took some of the pressure off the reasons to buy gold," said Ira Epstein, a broker with the Linn Group in Chicago.
Gold reversed its losses in afternoon trading, after sluggish US manufacturing data re-animated hopes that the Federal Reserve would delay raising interest rates. US factory activity, as measured by the Institute for Supply Management's manufacturing purchasing managers' index, expanded to 53.5 in January, a slowdown from 55.1 in December and below forecasts of 54.3.
While the PMI isn't the only gauge watched by the Federal Reserve, some gold traders bet that the US central bank would be more likely to raise interest rates later in 2015 than mid-year. The Federal Open Market Committee's statement after its meeting last week reiterated that officials would be patient in considering the timing of the rate increase, which, according to Chairwoman Janet Yellen, means the earliest the central bank would move would be June.
Gold is likely to have a harder time competing with interest-bearing assets when rates aren't pinned at zero, so any delay in raising rates is seen as positive for prices of the precious metal.
"While a flight to safety is likely to underpin gold's rally in the near term, we believe without a change in sentiment prices are set to endure downward pressure as the market shifts its focus to the US next quarter," said Barclays precious metals analyst.
News Source : dailytelegraph.com.au
January 11, 2016