Gold rises in thin trade but set for weekly loss

Closing Gold & Silver Market Report – 4/5/2012

Morning Gold & Silver Market Report – 4/5/2012

Gold rebounds after fall but fading QE hopes cap gains

* Stronger dollar caps gold's gains

* German government bonds hold near three-week highs

* Gold dips briefly after weekly U.S. jobless claims (Updates throughout, adds comments)

By Michelle Martin

LONDON, April 5 (Reuters) - Gold prices rose on Thursday as its fall to a near three-month low the previous day tempted some buyers back, but gains were capped by a rise in the dollar and fading hopes for more U.S. monetary stimulus.

Spot gold was up 0.6 percent at $1,628.34 an ounce at 1420 GMT. It briefly broke back above $1,630 an ounce as a drop in jobless claims pulled the dollar from its highs and stocks from their lows, but was unable to sustain the move.

Commerzbank analyst Daniel Briesemann said a countermove after the sharp price fall of recent days was to be expected, but said he expects prices to trade lower, possibly below $1,600 an ounce, after the current correction has run its course.

" Gold is highly correlated to equities and commodities at the moment and as long as the equity markets and the commodity markets are going down, so is gold," he said.

European shares hit a two-month low on Thursday and more losses are expected as worries build over Spain's debt burden and the possibility of more trouble in weaker  euro zone  states. safe-haven German bunds rose.

Investors will be looking to the March nonfarm payrolls report from the United States on Friday for further clues on the health of the labour market.

A spate of better-than-expected U.S. economic data has curbed investor appetite for gold by raising expectations that quantitative easing will prove unnecessary, especially after Fed minutes on Tuesday suggested more monetary stimulus was unlikely.

Ultra-loose monetary policy, which keeps real interest rates and consequently the opportunity cost of holding gold low, helped push the metal to record highs in 2011.

" Markets in general seem to be in risk-off mode as the Fed keeps quantitative easing on a back burner," Scotiabank analysts said in a note on Thursday.

HEADWIND FOR GOLD

" The fact this has given the dollar a boost is likely to be a headwind for gold and if we get a broad based sell-off then gold prices are likely to suffer as investors have to raise money against margin calls," they added.

" As such, we would not be surprised to see a move down in gold, but as concerns about Europe's debt are resurfacing, this time in Spain, the downside may be limited and safe-haven buying may soon return with vigour," they said.

Spanish government bond yields rose further on Thursday after investors worried about the country's ability to meet budget targets held back at debt auctions the previous day, rekindling funding concerns for lower-rated euro zone states.

Industrial output in  Germany  fell more than expected in February due to unusually cold weather, data showed on Thursday, tempering hopes Europe's largest economy will avoid a recession.

" In addition to Euro jitters potentially offering a 'prop' for gold, we also cannot rule out the possibility of the U.S. economic recovery 'topping out', bringing the easing option back onto the table, and thus throwing another lifeline to the precious metal," INTL FC Stone analyst Meir said.

Among other precious metals, spot silver was up 0.9 at $31.58 an ounce, spot platinum was down 0.1 percent at $1,593.94 an ounce, and spot palladium up 0.7 percent at $633.70 an ounce.

Loose underlying market conditions could prove tough for silver to overcome this year.

" Silver prices did manage to get some lift in March, but overhead supply seemed evident above $33.30 an ounce," Scotiabank said in its report. " However, considering the market is in a supply surplus, global growth is subdued and the EU debt crisis had calmed down in March, perhaps this was not so surprising."

" Given the economic slowdown in China and with Europe likely to see flat growth at best in 2012, industrial demand for silver is likely to be subdued and in turn that will put more pressure on investors to absorb the supply surplus. Considering all this, $30 an ounce still seems a relatively rich price for silver." (Editing by Jan Harvey and  Jason Neely) 

Gold falls to 3-month low, Fed easing hopes wanes

* Bullion posts biggest two-day loss in a month

* Gold down again as Fed minutes indicate QE3 unlikely

* Spot gold breaks below 300 DMA first time since Dec.

* Coming up: U.S. initial jobless claims Thursday By Frank Tang and Michelle Martin

NEW YORK/LONDON, April 4 (Reuters) - Gold fell to its lowest in nearly three months on Wednesday, sliding for a second straight session the day after minutes of the latest Federal Reserve policy meeting doused hopes for further U.S. monetary stimulus.

Bullion, tracking losses in equities and crude oil, posted its biggest two-day drop since Feb. 29 and could test technical support near the December lows around $1,530 an ounce. The more thinly traded silver and platinum group metals markets also tumbled.

Gold has dropped 5 percent in the last six sessions. The Fed minutes, released on Tuesday afternoon, set off the latest round of selling. Economists and gold analysts had largely factored in another round of stimulus by the Fed after the U.S. central bank in January said it would keep rates near zero until 2014.

" The change in the Fed's attitude caught a lot of folks by surprise. As we are not going to see as much stimulus, we are not going to see as much inflation pressure in the metals," said Sean McGillivray, head of asset allocation in Great Pacific Wealth Management.

Spot gold was down 1.5 percent at $1,620.85 an ounce by 2:55 p.m. EDT (1855 GMT), having earlier touched a low of $1,611.80, its lowest since Jan. 10.

U.S. gold futures for June delivery settled down $57.90 an ounce, or about 3.5 percent, at $1,614.10, with trading volume about 10 percent below its 30-day average, preliminary Reuters data showed.

Spot silver was down 4.3 percent at $31.23 an ounce.

Gold has fallen 3 percent so far this week, retreating more from the March high above $1,790 an ounce on QE3 hopes. McGillivray said gold's record high at above $1,900 an ounce in September 2011 reflected the premium of a third round of Fed asset buying known as quantitative easing (QE).

Some hedge funds which bet on gold as a hedge against the diminishing purchasing power of the U.S. dollar might have reduced their exposure to the metal, especially after a strong run of U.S. economic data and as the European debt situation appeared to stabilize.

" I wouldn't be surprised if we push lower towards $1,600 - that is what we think is a floor and we are unlikely to fall substantially below that," Standard Bank analyst Walter de Wet said.

On chart, the metal also broke below its 300-day moving average for the first time this year.

Global Hunter's Hasting said, however, $1,550 an ounce could be a good entry point for institutional investors after they were on the sidelines after the rallies in the first quarter.

FED EASING HOPES FADE FURTHER

Minutes of the U.S. central bank's policy meeting showed only two of the policy-setting Federal Open Market Committee's 10 voting members saw the case for additional monetary stimulus.

Ultra-loose monetary policy, which keeps real interest rates low, reducing the opportunity cost of holding gold, helped drive the metal to record highs in 2011.

" Gold responds better during periods of greater stress. And the last couple of months seemed to be a relatively stable and quiet period, and ," said Richard Hastings, macro strategist at investment bank Global Hunter Securities.

" If we were to break below $1,550, more significant doubts might emerge about gold's capability to regaining longer term price trends to the upside," Hastings said.

Other precious metals were weaker across the board, with spot platinum down 2.4 percent at $1,594.99 an ounce, and spot palladium down 2.4 percent at $632.75 an ounce.

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Closing Gold & Silver Market Report – 4/4/2012

Gold hits near 3-month low as Fed stimulus wanes

* Federal Reserve minutes indicate further asset buying unlikely

* Stronger dollar helps pressure gold to near 3-month low

* ECB hints that  euro zone  policy will stay accommodative 

By Michelle Martin and Jan Harvey

LONDON, April 4 (Reuters) - Gold prices hit their lowest since early January on Wednesday as comments from the European Central Bank lifted the dollar to three-week highs against the euro, accelerating a fall sparked by declining expectations of more U.S. monetary easing.

Spot gold was down 1.3 percent at $1,624.21 an ounce at 1338 GMT, having earlier touched a low of $1,617.29, its weakest level since Jan. 10. U.S. gold  futures  for April delivery were down $45.50 an ounce at $1,626.50.

The dollar rose to its highest since mid-March against the euro as investors compared the outlook for the U.S. economy to that of the euro zone after comments from ECB President Mario Draghi.

Draghi said the euro zone economic outlook is subject to downside risks relating to the debt crisis and commodity prices. European shares also fell after his comments.

" (Draghi) is saying strategy is pretty much that here we need to be accommodative, and that is obviously helping to pull the euro down at the moment," VTB Capital analyst Andrey Kryuchenkov said. " Because gold is inversely related to the dollar, that's what's dragging it (down)."

Gold has fallen 3 percent so far this week, retreating further from the high above $1,790 an ounce it reached in March on expectations for another round of U.S. quantitative easing.

Ultra-loose monetary policy, which keeps real interest rates and consequently the opportunity cost of holding gold low, helped push the metal to record highs in 2011.

But minutes of the U.S. central bank's latest policy meeting published on Tuesday showed only two of the policy-setting Federal Open Market Committee's 10 voting members saw the case for additional monetary stimulus.

" The minutes by the Fed indicated that there would be no quantitative easing unless the economy takes a dip for the worse - gold immediately sold off on that and now the dollar is stronger too, so that's weighing on gold," Standard Bank analyst Walter de Wet said.

" I wouldn't be surprised if we push lower towards $1,600 - that is what we think is a floor and we are unlikely to fall substantially below that," he said.

IMPROVING U.S. ECONOMY

A spate of better-than-expected economic data out of the U.S. in recent weeks has curbed investor appetite for gold, as it has raised expectations that quantitative easing will prove unnecessary.

" Armed with these most recent Fed minutes, a challenging stage is set for gold," UBS said in a note on Wednesday.

" Gold really does need the physical markets to step in right now. So far the response has been limited. The jewellers' strike in India persists, overnight demand from that region was poor and the Chinese market is closed, but returning tomorrow."

Jewellers in number one gold consumer India have been on strike for more than a fortnight, protesting against government plans to increase import taxes and duty on gold, curbing buying of the precious metal.

Trade body officials said on Wednesday that India's  finance  minister will meet the heads of jeweller associations on Friday to discuss the proposals. " The strike will continue until the excise duty is rolled back," said Kumar Jain, vice president of the Mumbai Jewellers Association.

Precious metals were weaker across the board, with spot silver down 3.1 percent at $31.60 an ounce, spot platinum down 1.7 percent at $1,606.99 an ounce, and spot palladium down 0.8 percent at $643.22 an ounce. (Editing by Anthony Barker) 

Morning Gold & Silver Market Report – 4/4/2012

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