Gold Creeps Up

June 3, 2013 at 06:50

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Gold edged higher on Monday, recovering from a near 2-percent slide in the previous session, as weak U.S. data hurt the dollar and strengthened hopes the Federal Reserve would stick to its bullion-friendly stimulus program.

Gold fell more than 6 percent in May amid concerns the Fed could slow its monthly bond purchases as the U.S. economy shows signs of improvement. But a flurry of disappointing U.S. data including Friday’s report on a decline in U.S. consumer spending weakened arguments for a near-term tapering of the central bank’s bond-buying stimulus.

The U.S. data watch continues this week as the Fed heads for its next policy meeting later this month.

“Everyone is waiting for U.S. non-farm payroll data this Friday to see what the central bank would do,” said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.

The Fed has said it would keep up the stimulus campaign until the employment situation improved.

The softer dollar is also supporting gold prices, said Peter Fung, head of dealing at Hong Kong’s Wing Fung Precious Metals.

Fung said Friday’s sharp price drop lured Chinese buyers on Monday, despite data pointing to slowing economic momentum in the world’s second-biggest gold consumer.

China’s factory activity shrank for the first time in seven months in May as both domestic and external demand softened, according to HSBC’s Purchasing Managers’ Index. An official manufacturing PMI, released on Saturday, rose only slightly.

Physical demand for gold has been strong since a mid-April drop in spot prices. Premiums in Asia are at or near all-time highs as gold has dropped nearly 17 percent for the year.

Gold demand in India will be as strong as last year in the second half of 2013 due to prospects of good monsoon rains that will boost the income of farmers, the key buyers, the World Gold Council CEO said on Friday.

Hedge funds and money managers increased their bullish bets in gold futures and options for the first time in four weeks, a report by the Commodity Futures Trading Commission showed on Friday.

Declines in the holdings of SPDR Gold Trust, the largest gold-backed exchange traded fund, have stopped after nearly three weeks. Holdings rose last Wednesday and have been unchanged since.