Gold steady after two-day fall, economic optimism weighs

Singapore – Gold was little changed on Thursday after a two-day decline but a rally in stocks and increasing optimism over global economic growth weighed on the metal’s appeal as an alternative investment.

The International Monetary Fund said on Wednesday it expects global growth to pick up this year, though deflation is a “rising risk” as long as economic growth stays below levels that policy-makers believe are optimal.

Gold, also seen as a hedge against inflation, could see further losses, say analysts, erasing the 3 per cent gains so far this year.

The metal had gained early in the year on strong Chinese physical demand and a weak U.S. jobs report, which sparked speculation that the U.S. Federal Reserve could slow the pace of tapering its monetary stimulus.

“We still see an erosion in gold prices, with the pace perhaps picking up over the next few days given the renewed vitality evident in the U.S. equity markets,” said INTL FCStone analyst Edward Meir.

Spot gold was flat at $1,240.35 an ounce by 0341 GMT. Other precious metals were also largely unchanged.

The dollar rose to a one-week high against the yen, as a set of robust U.S. data and upbeat earnings from Bank of America helped offset concerns of a growth slowdown following December’s disappointing payroll numbers.

“Against a backdrop of a stronger USD, rising U.S. 10-year bond yields and the failure of gold to break through a key resistance level of $1,255 in previous sessions, gold is likely to remain under pressure,”

In news on other precious metals, South Africa’s Association of Mineworkers and Construction Union (AMCU) said it would call a strike in the platinum industry if its members backed such action.

AMCU members have voted in favour of a stoppage at Impala Platinum over wages, and the union will canvas its rank and file this week at Anglo American Platinum and Lonmin.