Gold Struggles as Demand Slows for Now

February 19, 2013 at 07:56

truthing

Asian buying helped gold rebound from a six-month low. But investors elsewhere failed to follow suit and the metal fluctuated in a narrow range on light activity.

The yellow metal, which on Friday fell below the $1,600 a troy ounce level for the first time since August, managed to claw back its losses. Indian investors came in to buy as the market fell, while Chinese buyers, who have been out of the market because of the lunar new year holiday last week, came in with full force.

However, with the US market on holiday, buying petered out. There had also been a shift in the outlook for gold among investors, said analysts and brokers.

“We have seen the upside levels for a while now,” said David Govett, head of precious metals at brokers Marex Spectron. “In the face of increasingly positive economic data and good stock market yields, the zero returns of gold and silver are looking more and more unattractive,” he added.

Reports that hedge funds, including Soros Fund Management and Moore Capital, sold down their holdings of gold exchange traded funds in the last quarter of 2012 added to the downbeat mood.

Physical buying of the precious metal, which had provided support for the market in the past, failed to materialise in a significant way to calm market jitters. “Nervous investors did not get comfort that they used to get from physical markets,” said Joni Teves, analyst at UBS, a leading bullion bank.