adminas a hedge against inflation.
A weaker dollar also lent support to gold as it makes dollar-priced commodities more affordable for buyers holding other currencies.
Loose monetary policies have helped gold rally over the past few years, as investors fearing higher inflation as a result have parked funds in gold to hedge against rising prices.
Gold’s bull run has wound down in the past few months though amid speculation mounted that the US Federal Reserve may curtail its bond purchase programme sooner rather than later, as the world’s top economy showed signs of recovery.
Some senior Fed officials have insisted on continuing the expansionary monetary policy, arguing economic growth is not strong enough to reinvigorate the labour market.
“We are going through a very slow period and it is a situation where we need central banks to step up,” said Société Générale commodity strategist Jeremy Friesen in Hong Kong.
“If they do, it will be good for gold.”
Spot gold rose nearly half a percent to US$1 580,76 an ounce by 6.27am GMT. US gold was also up half 0,5 percent to US$1 580,30.
Technical analysis suggested spot gold was expected to rebound to US$1 589 an ounce, as indicated by its wave pattern and a Fibonacci projection analysis, Reuters market analyst Wang Tao said.
The balance sheet of the European Central Bank has effectively shrunk due to the early payment of a chunk of three-year crisis loans by banks, in contrast to the Fed’s ongoing US$85 billion monthly bond buying and the Bank of Japan’s plan for aggressive monetary policy.
If the ECB launches more stimulus, or other central banks’ accommodative measures offset the ECB’s de facto tightening, gold could get a boost, Friesen said.
The ECB, Bank of Japan and Bank of England will hold their policy meetings later this week, and investors are waiting to see whether any further stimulus programmes are approved.
Physical buying continued in Asia, though some buyers have moved to the sidelines of the market waiting for a clear direction in prices.
“We are not seeing as much buying as last week,” GoldSilver Central MD Brian Lan said in Singapore.
“Most people did their purchases last week and are now holding back, wondering whether prices will fall further, before they commit themselves to buy more.” Gold contracts traded on the Shanghai Gold Exchange remained at premiums of about US$20 an ounce above spot gold, luring Chinese buyers to the global market.
Investors continued to exit the SPDR Gold Trust, the world’s top gold-backed exchange-traded fund, which fell for the 10th straight session on Monday to a seven-month low of 1 253,283 tonnes. – Reuters.
Online Reporter