Gold Sentiment Cautious

July 9, 2012 at 11:14

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Gold prices moved slightly lower in lackluster Asian trading Monday, as investors remained cautious and awaited fresh cues following a sharp pullback in the previous session.

Prices tumbled in Friday’s trading after a disappointing U.S. nonfarm payrolls report for June sparked risk aversion and a flight to safe assets, including the U.S. dollar.

Gold fell alongside risk assets including base metals, indicating that investor appetite for using gold as a safe store of value remains muted.

Later Monday, the yellow metal will take direction from a meeting of European finance ministers, analysts said. Wednesday’s Federal Open Market Committee minutes will also be a key price driver this week.

With little support from safe-haven inflows and diminishing hopes for a third round of U.S. quantitative easing in the near term, prices will remain under pressure in the near term, analysts said.

“For now, prices appear to be taking the negative route down,” ANZ analysts said in a report, tipping next downside target at $1,565/oz.

Triland Metals analysts said investors are becoming increasingly skeptical that poor U.S. economic indicators such as Friday’s nonfarm payrolls will spur U.S. policymakers into action to boost the world’s largest economy.

“The QE3 bid that comes from bad U.S. data is becoming less and less patient, with rallies continuing to be sold,” they said in a report.

Given recent strength in the U.S. dollar and broad-based bearishness in financial markets, gold will likely trend lower in the near to mid term, Triland said.

The metal is also looking technically weak, Wing Fung analyst Mark To said in a note, recommending that investors hold short positions in anticipation of further near-term losses.