Gold hits two-month high, may rise further

Gold hits two-month high, may rise further

Gold hits two-month high, may rise further

Spot gold hit $1,227.60 — its highest level since July 1, and was later bid at $1,226.65 an ounce at 11.38 GMT, against $1,222.85 late in New York on Monday.
US gold futures for December delivery rose 2.5 cents an ounce to $1,228.70.

“Historically, gold has a very strong relationship with currencies and this has been somewhat mixed this year,” said RBS analyst Daniel Major. “(But) the last few weeks ... the currencies have started to have a bit more of a play on gold prices. This has been the predominant driver of the rally.”

The euro rose against the dollar and came off seven-week lows against the yen, helped as solid results at Irish and Spanish bond auctions alleviated concerns about heavily indebted euro zone countries.

But the euro struggled to hold above $1.29 on uneasiness about the economic outlook, with a key German survey sparking concerns about whether Europe’s largest economy can sustain a solid recovery.

“People are worried about the pace of recovery, particularly after some quite weak data out of the United States and Japan recently,” said Daniel Smith, an analyst at Standard Chartered Bank.

“At the moment it looks like the market is breaking down that overhead resistance and we’re likely to move up to $1,250 as the next target,” he added. Bullion touched a record high of $1,264.90 an ounce on June 21. Earlier this week, data showed that growth in Japan’s economy slowed to a crawl in the second quarter and analysts see more weakness ahead.

Dealers in Asia reported buying from investors and selling from jewellery makers. There was soft physical buying from top consumer India as demand is set to pick up for the busy festival season, starting with Raksha Bandhan on August 24 and extending till Dhanteras in November.

“We’ve seen some good buying out of India — that is going pretty well,” added Smith.

“Of course India has a problem with inflation ... the impact on gold is a little bit unclear.”

“Bullion gained ground with the late July short-term uptrend intact as risk aversion and a fresh flight to safety pushed prices towards 2-month highs,” VTB Capital said in a note.

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