|23 January, 2020

Gold dips on profit-taking, rate expectations cap losses

Spot gold was down 0.2% at $1,556.20 per ounce

Image used for illustrative purpose. A one kilo gold bar is displayed in a shop in Dubai's gold souk, April 11, 2006.

Image used for illustrative purpose. A one kilo gold bar is displayed in a shop in Dubai's gold souk, April 11, 2006.

REUTERS/Tamara Abdul Hadi

Gold eased on Thursday as investors booked profits from recent rallies but held above the $1,550 technical support level on continuing low interest rates and a drop in risk appetite.

Spot gold was down 0.3% at $1,554.24 an ounce by 1127 GMT. U.S. gold futures fell 0.2% to $1,553.80.

"From the beginning of the year, gold has rallied and that had led investors to take positions and now in the absence of any major news (on fundamentals), they are booking some profit," said Frederic Panizzutti, managing director at MKS Dubai.

Gold broke above the psychological barrier of $1,500 an ounce in late December on uncertainty surrounding the U.S.-China trade deal and the global economy.

Bullion climbed further to a near-seven-year peak of $1,610.90 on Jan. 8 after an escalation in U.S.-Iran tensions and has held above $1,550 for the most part ever since.

"In the long term, the market is still bullish," Panizzutti added, pointing to geopolitical uncertainties and low interest rates that reduce the opportunity cost of holding non-yielding bullion.

Investors were awaiting the European Central Bank's monetary policy decision at 1245 GMT after a meeting at which ECB President Christine Lagarde is set to launch a broad review of its policy. 

The U.S. Federal Reserve's first meeting of the year is scheduled for Jan. 28-29.

Limiting gold's losses, global stock markets were in the red, led by the biggest decline in Chinese stocks in more than eight months as concern mounted over the spread of a virus outbreak in China.

Traders remained anxious about the spread of the coronavirus as China gears up to celebrate the Lunar New Year from this weekend, a peak period for travel and gold demand in the region.

Gold is considered a safe asset in times of political and economic uncertainty.

However, OANDA analyst Jeffrey Halley said the virus fears appear to have have been overlooked by the gold market.

"If regional investors were seriously concerned about coronavirus, we would have expected gold to be higher and not lower today," he said in a note.

Spot gold is biased to revisit its Jan. 21 low of $1,545.96, looking shaky around a resistance at $1,564, said Reuters technical analyst Wang Tao. 

Among other precious metals, palladium fell 0.4% to $2,461.64, silver dipped 0.9% to $17.66 and platinum XPT= was also down 0.9% at $1,003.09.

(Reporting by Diptendu Lahiri and Sumita Layek in Bengaluru Editing by David Goodman) ((Diptendu.Lahiri@thomsonreuters.com; within U.S. +1 651 848 5832; outside U.S. +91 80 6749 3683;; Reuters Messaging: diptendu.lahiri.thomsonreuters.com@reuters.net))

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