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Spot gold takes breather
Published in The Saudi Gazette on 24 - 02 - 2012

Spot gold edged lower Thursday, taking a breather after hitting a three-month high in the previous session, while sentiment remains supported on hopes of further monetary easing after sluggish economic data from the euro zone and China.
Data showed unexpectedly weak activity in the euro zone, while China's manufacturing sector contracted for the fourth straight month, fueling anticipations that central banks will further ease monetary policy to promote economic growth.
Gold benefits from loose monetary policy, as abundant credit keeps the opportunity cost of carrying gold low. In addition, higher inflation outlook caused by a flood of cheap cash burnishes the appeal of gold, traditionally seen as a good hedge against inflation.
“There is always a case to be made for gold, as long as the central banks keep taking new easing measures or keep indicating they will take more new measures down the road,” said a Singapore-based trader
He said that the weak numbers of out China added to the argument that more easing will be adopted by Beijing.
Spot gold edged down 0.1 percent to $1,773.89 an ounce by 0338 GMT, after three consecutive days of gains. US gold inched up 0.3 percent to $1,775.80 an ounce.
Technical signals were also supportive of gold's strength. Chart analysis suggested that spot gold could extend gains to $1,797 an ounce during the day, Reuters market analyst Wang Tao said.


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