Gold may advance after two weeks of declines as renewed concern that the global economy is faltering helps to boost demand for the metal as a store of value.
Bullion for immediate delivery rose as much as 0.3 percent to US$1,214.60 an ounce before trading at $1,212.43 an ounce at 2:16pm in
The metal fell 3.5 percent last week after dropping 0.1 percent the week before. August-delivery futures rose 0.5 percent to $1,212.80 an ounce.
“The economic outlook remains murky,” said Hwang Il Doo, a Seoul-based trader with KEB Futures Co.
“Gold has held out above $1,200 an ounce even in a correction mode, which sends a signal to me that it retains the strength to climb.”
Service industries in the United States probably expanded at a slower pace in June, indicating that the economy started to cool entering the second half, economists said before a report from the Institute for Supply Management this week.
Commodities as measured by the Reuters/Jefferies CRB Index slipped the most in two months after a report last week that US employment fell.
“We expect the US economy to continue on a rocky recovery path,” David Moore, an analyst at Commonwealth Bank of Australia, wrote in a report yesterday.
“The uneven nature of US economic recovery will add to volatility in commodity prices.”
Gold touched a record $1,265.30 an ounce on June 21 amid concern that Europe’s sovereign debt crisis may derail the global economic recovery.
Hwang at KEB said gold demand may increase and expressed “doubt the euro can continue to advance”.
The euro traded at $1.2537 against the dollar in Tokyo yesterday compared with the four-year low of $1.1877 on June 7.
The currency has fallen 13 percent this year.
Eighteen of 23 traders, investors and analysts surveyed by Bloomberg, or 78 percent, said bullion would rise this week, three forecast lower prices, and two were neutral.
Hedge-fund managers and other large speculators boosted net-long positions in New York gold futures in the week to June 29, according to US commodity futures trading commission data.
Speculative long positions, or bets prices would rise, beating short positions by 244,725 contracts on the Comex division of the New York Mercantile Exchange, the commission said in its “Commitments of Traders” report.
Net-long positions rose by 6,091 contracts, or 3 percent, from a week earlier.
“The gold market may be subdued and trading light as US markets are closed for Independence Day,” said Ong Yi Ling, an analyst with Phillip Futures Pte Ltd in Singapore.
“Prices are unlikely to breach the $1,200 key psychological level; that should provide near-term support to gold.”
Silver for immediate delivery was little changed at $17.88 an ounce, while palladium dropped 0.8 percent to $429.05 an ounce.
Platinum rose 0.4 percent to $1,507.85 an ounce.