(Reuters) – Gold price steadied on Tuesday nearing a week-high as the dollar weakened, but stayed at risk of further failure on uncertainty over the U.S. stimulus outlook and weak physical demand.
The price of gold in the spot market hit $1,256.49 in early trades, the highest since Nov. 20, and it stayed almost unchanged at $1,251.70 an ounce by 10:51 GMT. U.S. gold futures, Comex, dropped 0.8% to $1,251.30 an ounce.
On Monday, spot gold fell to a four and a half month low near the $1,225 an ounce mark, after a deal halting Iran’s most sensitive nuclear activities pushed oil prices lower and hoisted the dollar and equities.
Gold price recovered to gain nearly 1% as investors covered short positions, while options-related purchases helped the metal to push higher.
Gold dropped below $1,300 an ounce on Nov. 7 after a sequence of positive U.S. financial facts and figures raised speculations that the government Reserve would taper its economic stimulus before the end of the year.
Traders expect prices to be forced until there is a definitive timeline on when the U.S. government book will begin chopping its quantitative easiness program.
Commerzbank analyst Daniel Briesemann commented, no significant data will be available this week and gold will be more or less “treading water” and will be likely driven by the U.S. dollar pressure and ongoing discussions on when the Fed will start tapering.
The yellow metal prices lost about a quarter of their worth this year on doubts the Fed would start tapering the $85 billion in monthly bond purchases that have supported bullions as a hedge against inflation.
The next foremost economic data issue is on Dec. 6, as U.S. nonfarm payroll data is scheduled. The Fed’s next principle meeting will be held on Dec. 17-18.
The dollar index was down 0.2% as U.S. 10-year Treasury yields fell after data on Monday displayed agreements to purchase before owned U.S. homes hit a 10-month reduced in October.
Physical demand, which generally supplies a floor to charges, has failed to pick up the way it did previous this year when prices fell over $200 an ounce in two days.
Buying selected up when prices dropped underneath $1,230 on Monday but quickly passed away down as these shot up afresh, dealers said.
Premiums in Shanghai for 99.99% purity bars dropped to about $8 an ounce on Tuesday from $13 in the previous meeting.
Outflows from gold funds proceeded, as the world’s biggest gold-backed exchange-traded fund, SPDR Gold Trust, liquidated 3.30 tonnes on Monday. Outflows from the ETF reached almost 450 tonnes so far this year, and performed a big part in denting prices.