Monday, September 14, 2009

Gold steadies At $1,000/Oz A Day After Retreat

. Monday, September 14, 2009

By stockOzone team

Gold prices steadied at around $1,000 per ounce on Tuesday after retreating from an 18-month high marked late last week, underpinned by a shift toward the metal from currencies.

Gold fell 0.6 percent on Monday, marking the biggest percentage fall in three weeks.

But its recent push above $1,000, reflecting a shift by investors away from volatility in currencies, has now brought gold's trading range to $980-$1,030, a factor limiting the downside, traders said.

The market has been consolidating on a round of profit-taking, said Louis Lok, a senior dealer at Bank of China.

"But I think the $1,000-$1,005 level is good support. I'll have to wait-and-see," he added.

Spot gold was almost flat at $998.85 per ounce as of 11:26 p.m. EDT, compared to New York's notional close of $998.65 and a Monday low of $992.90.

It hit $1,011.55 on Friday, its highest since March 2008.

U.S. gold futures for December delivery edged down to $1,000.50 per ounce. On Monday, the contract fell $5.30 to $1,001.10 on the COMEX division of the New York Mercantile Exchange, retreating further from a Friday high of 1,013.70, its highest since February 20.

Traders say there has been a shift toward gold from currencies, which has coincided with dollar vulnerability.

Gold's resilience differs from earlier this year when gold rose on a slump in the dollar versus the euro, said Kaname Gokon, deputy general manager at Okato Shoji Co's research section.

"Gold looks like it will stay strong as there is a general preference for the precious metal. But in order to gain a further momentum, we first have to deal with a heavy pile of long U.S. futures positions," he said.

"The market is going to find it difficult to move away from this heavy burden limiting the upside, unless gold retreats to $980 or so," he said.

Previously, gold was mostly traded between $930-$970 and formed a sideways triangle pattern for months. The break of that technical pattern when gold rallied beyond $1,000 has invited heavy fresh longs in U.S. gold futures.

In contrast, money inflows into gold-backed securities remained slow.

The world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, said its holdings rose by 1.221 metric tons to 1,078.851 metric tons on Monday, marking their first rise since September 3.

Disclosure: Author does not own any of the stocks discussed here.

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