Gold pauses after rally triggered by weak US data
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Gold edged lower on Monday after posting its biggest rally in more than three years in the previous session, when dismal U.S. jobs data fuelled speculation about further monetary easing and burnished gold's appeal as a hedge against inflation.
The surprisingly weak U.S. employment data added to the gloom over the global economy, just as the euro zone appears to be sinking deeper into the debt crisis and China's growth slows.
Gold broke ranks with riskier assets on Friday and rose 4 per cent, propped up by rekindled expectations of further monetary easing by the U.S. Federal Reserve.
Asian investors, however, were less than convinced that the Fed would implement monetary easing soon, and were selling at the higher prices to lock in profits.
"People are still not sure where things may go and have been selling after prices jumped," said a Singapore-based dealer.
Spot gold edged down 0.3 per cent to $1,621.40 an ounce by 03:21 GMT (8:51 a.m. IST). It had fallen to as low as $1,614.59 earlier in the session.
U.S. gold futures contract for August delivery was little changed at $1,623.
The London financial markets are closed on Monday and Tuesday for a public holiday.
Bullion fell more than 6 per cent in May, under the weight of a dollar that rallied more than 5 per cent as investors piled into the greenback, U.S. Treasuries and German Bund during a deepening euro zone crisis.
But if the U.S. recovery falters as well, gold will have a chance to shine once again as a safe haven as investors look for alternatives.
"The immediate drive is to move to Treasuries and Bund. But why would you want zero return on the Bund while you can buy gold? Gold still has value," said Jeremy Friesen, commodity analyst at Societe Generale in Hong Kong.
Net long positions in U.S. gold futures and options inched up by seven contracts to 77,325 contracts in the week ended May 29, after declining for three weeks straight, said the U.S. Commodity Futures Trading Commission.
Net long positions in silver eased 2 per cent to 4,912 contracts, the lowest since November 2008, the CFTC data also showed.
Spot silver lost 0.8 per cent to $28.41, after rallying 3.6 per cent on Friday - its biggest one-day rise in more than three months.
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