Gold edges lower

LONDON. — Gold edged lower yesterday as equity markets rallied after the new Federal Reserve chief painted an optimistic economic outlook that whetted investor risk appetite. In her first public comments since becoming Fed chairwoman, Janet Yellen said the central bank would consider more than the unemployment rate when evaluating the condition of the US labour market, broadening the scope of her predecessor’s forward guidance on monetary policy.

“If you look at the wider economic picture in the US and not only at the non farm payrolls, that still looks good and it is likely to improve over the next few months,” Natixis analyst Bernard Dahdah said.

“From that perspective, we are expecting to see the price of gold heading back down as there will be no incentives for investors.”Spot gold was down 0,3 percent to US$1 286,80 an ounce by 11.04am GMT, snapping a three-day winning streak.

It closed up 1,3 percent in the previous session.
US gold futures for February delivery fell US$2,90 to US$1 286,90 an ounce. Strong technical buying sent gold to a three-month high of US$1 293,44 an ounce on Tuesday, which made the metal rally at the same time as equities.

But as stock markets continued to add to gains on Wednesday, the metal lost ground.
Gold usually holds an inverse relation with the direction of shares, as risk appetite detracts interest from the metal, regarded as a safe haven.

Technically, a confirmed close above the US$1 290/US$1 300 area could signal further gains, while support was pegged at US$1 278, analysts said.
“Any attempt at the US$1 300 psychological mark is likely to meet resistance and attract those who have been waiting for more attractive levels to close out longs or initiate shorts,” UBS said in a note.

“Hints from the Fed chairwoman yesterday, which were broadly in line with expectations, confirm that the status quo remains intact and as such, nothing has really changed for gold from a macro perspective.”

In wider markets, the dollar index pulled away from two-week lows, while European shares rose, following a rally in Asian markets after upbeat trade data from China.
Gold has gained about 7 percent since the beginning of the year, propped up by emerging market jitters and concerns over economic growth in China.
It had fallen 28 percent in 2013, snapping a 12-year run of gains, as the Fed looked set to unwind its bond-buying stimulus, which had supported prices. – Reuters.