Gold prices may decline as rally wanes

Gold swung between gains and losses after a rally that took the metal to within three per cent of a record prompted some investors to sell to lock in gains.

Immediate-delivery gold traded little changed at $1,225.98 an ounce at 11:21am in Singapore after climbing on Tuesday to $1,229.07, the highest level since July 1. The metal gained as much as 6.2 per cent in the three weeks to Tuesday's high as concern deepened that the global recovery may falter.

“We could see profit-taking by short-term-oriented market players, which should prevent a further sharp rise in gold,” Eugen Weinberg, head of commodity research at Commerzbank AG, wrote in a report.

Gold has rallied 12 per cent this year, reaching an all-time high of $1,265.30 an ounce in June, as the prospect of currency debasement prompted investors to seek a refuge. The precious metal is on course for a 10th annual gain.

The Dollar Index, a six-currency gauge of the dollar’s strength, rebounded as much as 0.2 per cent on Wednesday after dropping as much as 0.6 per cent on Tuesday. The dollar has weakened about seven per cent since touching a 15-month high of 88.71 in June.

Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, increased 7.91 metric tonnes to 1,294.60 tonnes on Tuesday, according to the company’s website. Holdings peaked at a record 1,320.44 tonnes in June.

Speculative net-long positions, or bets prices will rise, gained 2.8 per cent on the Comex in the week ended August 10, according to US Commodity Futures Trading Commission data.

“Gold is likely to remain well-supported above the $1,220 level,” said Ong Yi Ling, a Singapore-based analyst at Phillip Futures Pte Ltd. The rise in ETF holdings “demonstrates the strong investment interest in gold that could continue should worries regarding the economic recovery accelerate.”

Reports this week showed Japan’s economy grew at less than a fifth of the pace economists estimated last quarter; New York region manufacturing expanded less than forecast in August; and Australian wages grew at a slower pace in the second quarter. To be sure, US industrial production jumped 1 percent in July twice as much as forecast, according to a report on Tuesday.

December-delivery gold in New York fell as much as 0.2 per cent to $1,226 an ounce before trading at $1,227.80. Silver for immediate delivery and palladium were little changed at $18.5225 an ounce and $495.80 an ounce, respectively, while spot platinum declined 0.3 per cent at $1,539.20 an ounce.