(Reuters) – On Monday, gold prices eased from an 11-week high over $1,400 an ounce hit overnight in Asia, as improbability over a moderate firmer dollar and the outlook for U.S. monetary policy kept the yellow metal in check.
Bad U.S. data and news that the world’s largest gold-backed exchange traded fund (ETF) had recorded its biggest one-day inflow this year helped an early rally in bullion, with a key chart level increase to $1,406.01, its highest since June 7.
Yet, it retreated quickly to trade little different from Friday, after the technically-driven rally slow down.
Spot gold declined 0.2% at $1,395.85 an ounce by 0941 GMT. The yellow metal increased 1.6% on Friday after weak U.S. home sales data, which possibly softens the case for the Federal Reserve tapering economic stimulus.
U.S. gold December futures for delivery increased 10 cents an ounce at $1,395.90.
The London A.M. fix is $1,374.50.
Afshin Nabavi, head of trading at MKS in Switzerland, said “The market is very nervous and unsure, therefore we need a direction. (The) Fed and U.S. dollar seem to be it for the time being,” also added “1400 is a big resistance, and although overnight we tested 1407, due to stops.”
He said “Demand for physical has cooled off due to the sudden rally,” additionally “We gained almost $35-40 in a short span of time; the market needs to cool off before real buying comes in.”
The dollar index increased 0.1% on Monday, even though moves were soft as investors waited for clearer guidance on the prospects for an early extraction of stimulus by the Fed.
On Saturday, a top U.S. central banker said that the Federal Reserve might say a cautious first step in tapering bond purchases at next month’s meeting, on condition that there were no “really worrisome” signs the economy was hesitant.
The SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund (ETF), holdings increased 6.61 tons to reach 920.13 tons on Friday, its largest one-day inflow since October 8.