Gold spot price rises today, but down 2% on week

The XAU/USD today has risen to the current price of $1,248 an ounce. It reached an intraday high of $1,250, where the price encountered resistance at the 4H 89-period simple moving average.

At the moment the price is around two percent below this week’s opening level, and about 2.35 percent up on the month.

Gold is heading for its first weekly loss since December on signs of faster US economic growth which raised bets that the Fed will continue reducing stimulus, subdued Chinese demand and an easing of declines in emerging markets.

Gold fell “as previous safe-haven buying possibly related to the emerging-market currency declines and financial market worries evaporated,” HSBC Securities analyst James Steel wrote in a note yesterday. The metal also dropped in reaction to “generally positive US economic data,” he added.

Data released yesterday revealed that the US Gross Domestic Product grew at a 3.2 percent annualized rate in the final quarter of 2013, in line with analysts’ expectations.

Gold rose earlier this month, supported by a weakness in global equities as a result of concerns about emerging economies.

The Fed announced on Wednesday its decision to cut bond purchases to $65 billion per month from $75 billion, matching expectations.

Quantitative Commodity Research owner Peter Fertig says that the strengthening of the US dollar against emerging markets currencies is “negative for gold”.

“But what is also important is the negative correlation between stock markets, especially the US ones, and gold and the weakness in emerging markets. Fears that it may lead to widespread crisis are currently
sending shivers through the stock markets,” Fertig adds.

The turmoil in emerging markets is, however, unlikely to derail the foundations of the global economic recovery, while the hawkish bias of the Fed remains in place, UBS says in a note.“

That implies that any upside for gold should be short-lived ... for now, rallies in gold remain as selling opportunities,” the bank says.

A reduction in physical buying has added to the pressure on the gold price, as the world’s biggest gold consumer – China – has today started to celebrate the Lunar New Year, and the holiday will last one week.

“Near-term, gold fundamentals look bearish, as Chinese demand is side-lined for the next few weeks with the New Year holiday,” ANZ says in a note.

Gold premiums in Chinese had fallen to $4 an ounce yesterday from over $20 at the start of this month.