Gold price steady on US manufacturing data

Spot gold held steady on Tuesday supported by physical demand and a stronger dollar linked to U.S. manufacturing data that showed the economy might be on a steady recovery.

The dollar index edged higher, with the yen on the backfoot after upbeat data suggested the world’s largest economy will accelerate in 2011 following recent run of encouraging data.

“The dollar is a little bit stronger this morning. If it has any negative impact on gold, it’s only short-term.

The market is still on positive side,” said Dick Poon, manager of precious metals at Hareaus in Hong Kong.

“There are still worries about the economy in the euro zone. For the long term, people would want to put money in commodities, metals.”

Another key concern hanging over the market is the prospect of further near-term interest rate hikes in nations such as China and India, and even the United States later this year, that could dampen enthusiasm for gold by investors, Poon added.

Spot gold was little changed at $1,415.30 an ounce by 0321 GMT. U.S. gold futures lost half a percent to $1,416.3 an ounce.

Physical buying are expected to return in coming days, after the holiday break, which is seen supportive of gold prices, traders said.

“The market is very quiet. I’m slightly concerned about bond yields. If bond yields go up, it’s probably not good for gold,” said a Singapore-based trader.

Benchmark U.S. 10-year Treasury notes were down 5/32 in price to yield 3.35 percent, up about 2 basis points from late U.S. trade on Monday, as the market stayed on the back foot ahead of a string of data releases this week that could reinforce a pickup in optimism toward the economy.

Eyes are on U.S. non-farm payrolls data due Friday, expected to show an improvement labor market.

Technical analysis showed that a bearish target at $1,370 per ounce is unchanged for spot gold as a five-wave cycle that started around $1,314, completed at the previous session high of $1,423.57, according to Reuters market analyst Wang Tao.

On the base metals market, three-month copper on the London Metal Exchange reached a new high at $9,725 a tonne. It broke records in five of the past seven sessions, boosted by better economic outlook and expectations on tighter supply in 2011.

Source: Reuters