Gold edged lower on Monday
after rising by the most since November in the previous session
on poor U.S. jobs data, with funds expected to continue cutting
bullion holdings for better investment yields elsewhere.
But gold futures in Tokyo jumped almost 5 percent to near
all time-highs, marking their sharpest daily rise since
September 2011, after the yen dropped to near four-year lows on
reports the Bank of Japan would begin buying longer-dated bonds
immediately to beat deflation.
Spot gold had dropped 0.2 percent to $1,578.94 an
ounce by 0642 GMT, also hurt by a firmer dollar versus a basket
Gold climbed nearly 2 percent on Friday after data showed
U.S. employers hired at the slowest pace in nine months in
March, backing expectations the Federal Reserve would sustain
its bullion-boosting monetary stimulus programme.
But Monday's price drop shows the fund shift out of gold
remains intact with the U.S. economy generally expected to
perform better in the longer term, said Joyce Liu, investment
analyst at Phillip Futures.
"People are really pulling funds out of gold for better
investments such as equities and real estate in emerging
economies," said Liu.
"The kind of rally that we saw from 2009 to 2011 is no
longer going to be there anymore. We are more or less used to
having so much money flowing around in the economy."
Liu said she sees gold testing a support level of $1,530,
possibly over the next two weeks.
Gold hit a 10-month low of around $1,539 last week and is
down nearly 6 percent this year. In contrast, the S&P 500 stock
index has gained almost 9 percent.
Others are more bearish on gold's prospects.
"The lack of investment interest is currently a key drag on
the market," Credit Suisse analysts said in a note.
"With technical momentum turning negative, there is a risk
for a shift lower towards $1,520 and ultimately $1,500, which is
a critical technical area that needs to hold for the sideways
trend to remain intact."
U.S. gold futures were up 0.2 percent at $1,579.10
Bullion holdings at the world's major gold exchange traded
funds continued to fall, hitting their lowest
since August 2012.
In Tokyo, gold futures surged as much as 4.8 percent to
5,025 yen ($51.71) per gram, near the record high of 5,081 yen
touched in February, as the yen faltered.
The most-active February contract on the Tokyo Commodity
Exchange closed up 4.5 percent at 5,015 yen, the biggest
single-day percentage increase since Sept. 27, 2011.
The Japanese currency slid to 98.85 versus the dollar, its
weakest since June 2009, on reports that the central bank would
buy 1.2 trillion yen ($12.35 billion) of government bonds with a
maturity of over five years this week, showing a sense of
urgency never before seen in the BOJ.
"If the yen goes up to 100 then we have quite a good chance
to try higher prices for TOCOM gold," said Yuichi Ikemizu,
branch manager for Standard Bank in Tokyo.
Last week, the BOJ promised to inject about $1.4 trillion
into the economy in less than two years, a gamble that sent bond
yields plummeting as prices rose on the prospect of massive
purchases of debt by the central bank.
Precious metals prices 0642 GMT
Metal Last Change Pct chg YTD pct chg Volume
Spot Gold 1578.94 -2.56 -0.16 -5.71
Spot Silver 27.30 0.00 +0.00 -9.84
Spot Platinum 1539.24 8.24 +0.54 0.28
Spot Palladium 729.72 3.31 +0.46 5.45
COMEX GOLD JUN3 1579.10 3.20 +0.20 -5.77 19847
COMEX SILVER MAY3 27.25 0.03 +0.09 -9.87 3473
COMEX gold and silver contracts show the most active months
($1 = 97.1700 Japanese yen)