NEW YORK/LONDON (Reuters) – Gold rose on Monday after a steep drop last week, with some investors encouraged by signs that central banks have been buying the precious metal on dips, but technical factors suggested prices could fall further.
Bullion followed gains in U.S. equities, a stronger euro and higher investor appetite across the board, after a strong run of U.S. job and manufacturing data.
Gold fell 3 percent last week as investors reacted to a Federal Reserve statement that did not promise another round of government bond buying, or quantitative easing.
“At this point, gold is simply consolidating its recent decline below both its 50- and 200-day moving average lines,” said Adam Sarhan, CEO of Sarhan Financial.
“If support at $1,630 an ounce – which gold has held for three straight weeks – is broken, one can expect another leg lower to begin,” Sarhan said.
Spot gold was up 0.6 percent on the day at $1,663.94 an ounce by 1:08 p.m. EST (1708 GMT). The price drop of 3 percent last week was its second biggest weekly decline of 2012.
Recent pullbacks have prompted more gold investors to buy puts with lower strike prices while holding their long futures position to protect against downside risk, said Jonathan Jossen, an independent COMEX gold options floor trader.
Three weeks of upbeat U.S. data have made investors more confident about the economy and less eager to hold gold as insurance against another slowdown.
The resulting steep rise in benchmark 10-year U.S. Treasury yields has weighed on gold.
U.S. gold futures for April delivery were up $8.70 at $1,664.50 an ounce in decent trading volume.
CENBANKS BUY GOLD AFTER DROP
Central banks reportedly bought around $250 million worth of metal last week through the Bank for International Settlements, sources said.
They were net buyers of gold last year for a second straight year with a 439.7 tonnes purchase in 2011. In the two decades prior to 2010, central banks as a group had consistently been net sellers of gold.
In the investment sector, gold exchange-traded fund holdings have also risen for 10 straight weeks, driven mostly by inflows into the main North American funds.
In other precious metals, silver rose 1.2 percent to $32.94 an ounce, while palladium rose 0.6 percent to $702.97 an ounce and platinum edged up 0.6 percent to $1,677.50 an ounce. Prices at 1:08 p.m. EST (1708 GMT)
LAST NET PCT YTD
CHG CHG CHG US gold 1664.50 8.70 0.5% 6.2% US silver 32.955 0.351 1.1% 18.1% US platinum 1683.40 7.90 0.5% 20.3% US palladium 706.65 4.95 0.7% 7.7%
Gold 1663.94 10.45 0.6% 6.4% Silver 32.94 0.38 1.2% 19.0% Platinum 1677.50 10.04 0.6% 20.4% Palladium 702.97 4.47 0.6% 7.7%
Gold Fix 1661.50 7.50 0.5% 5.5% Silver Fix 32.44 17.00 0.5% 15.1% Platinum Fix 1673.00 1.00 0.1% 21.1% Palladium Fix 702.00 2.00 0.3% 10.4%