Early Tuesday, spot gold broke its two straight loss sessions and climbed one-half percent. Investors remain focused on the Greek debt restructuring discussions. Another contributing factor was likely central bank gold purchases.
During the previous session, bullion dropped to its lowest in 1 ½ weeks upon Greece postponing a decision to accept unfavorable bailout terms. Tuesday is the deadline to accept these terms and this caused Asian markets to be lackluster.
Investors are divided regarding whether Greek economic discussions would be resolved or would affect other vulnerable nations in the euro zone. By 7:13 GMT, spot gold had climbed from $1,711.29 to $1,728.09 per ounce.
The U.S. precious metal increased 0.3 percent to reach $1,730.60 per ounce. Despite the previous two-session decline in prices, traders and analysts remain bullish over the long-term.
Demand for a safe-haven in an uncertain economic forecast and hope for monetary easing within key global economies are supporting this.
UBS Wealth Management commodity research head Dominic Schnider commented on the previous two sessions of loss. Calling it a “technical reaction after a solid run,” he noted the impact of the U.S. employment data [according to The Economic Times].
On Friday, the release of jobs data that was more positive than expected knocked the price of spot gold down by almost two percent. Mr. Schnider is among the analysts who believe that the extremely loose U.S. Federal Reserve monetary policy will give gold a boost during the long-term.
According to the UBS head of commodity research, $1,680 would be a key support position for the precious metal. Analysis indicated that the spot price could drop to $1,696 within the day, reported Wang Tao, a Reuters market analyst.
HSBC, a major bullion bank, reported it was holding its average forecast for 2012 steady at $1,850 per ounce. Its decision was based on investor uncertainty regarding financial markets and very accommodating worldwide monetary policies.
Recent data revealed that China gold demand continues to grow. Despite a sharp decline in the December 2011 shipment of the precious metal, imports from Hong Kong increased more than three times from 2010 to 2011, reaching 427,877 kilograms.
The recent decline in price has spurred China and India gold demand. Other Asian countries have also seen increased buying activity. However, Japanese investors continue to await additional trading indicators.
At one large Tokyo bullion house, an official reported that they “haven’t seen any interest on either buying or selling [according to The Economic Times].” In mid-January, the discount on Tokyo bullion bars increased from 50 to 75 cents. Despite this, bullion sentiment should continue to be supported by strong China and India gold demand. Asian bargain hunters, especially those in China, are helping spot prices to rebound.
Last week, large speculators including hedge funds and other money managers increased their net length for U.S. options and futures for the precious metal. It is now at its highest level since late November 2011, according to the U.S. Commodities Futures Trading Commission. The impact of the impending Greek bailout deadline is sure to be felt later today.
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