Gold steady after record high; more upside seen

Spot gold was steady after surging to a record in the previous session, and more upside is likely as investors remain nervous about the global economic recovery.

Spot gold was little changed after having surged more than 2% to a record $1,274.75 an ounce in the previous session, its biggest one-day gain in four months.

“Reaching $1,300 is just a matter of time. The most important factors are zero interest rates and that the world economy outside Asia still seems unstable,” said a Hong Kong-based dealer. “These are all positive signs for gold.”

U.S. short-term rates remained steady at low levels on Tuesday, anchored by the Federal Reserve’s determination to keep rates down, likely making gold attractive as an investment.

Still, the latest data from the U.S. helped ease fears of a double-dip recession by showing August retail sales posted their largest gain in five months.

The world’s largest gold-backed exchange-traded fund, SPDR Gold Trust [GLD 124.024 2.404 (+1.98%) ], said its holdings rose to 1,298.698 tonnes by Sept 14 from 1,292.619 tonnes by Sept 13. The holdings hit a record at 1,320.436 tonnes on June 29.

AngloGold Ashanti Ltd, the world’s third-largest gold miner, plans to remove its gold hedge book – one of the biggest among its global peers – by early 2011.

The move should help underpin gold prices, dealers said.

“The market is still on the upside. There’s some buying interest from the option-related business. For the physical side, we see some buying interest from China,” said Peter Fung, head of the dealing department of Wing Fung Precious Metals in Hong Kong.

“We are seeing mixed interests at the $1,268 to $1,270 level. There is some bargain-hunting here. From here, the market is looking at the $1,280 to $1,290 level.”

The interest from central banks in adding to their gold holdings is rising, after years of selling bullion, which would prove to be a major supportive plank for the market, said Ben Westmore, commodities economist at National Australia Bank.

“The central bank story really looks like it’s gone from one of net selling to net accumulations.

In addition to purchases by central banks in Asia, we calculate Russia may have added 90 tonnes to its gold stocks in the quarter ending June,” he said.

On the Shanghai Gold Exchange, spot gold hit an intra-day high of 276.17 yuan a gram, just a notch lower than the all time high of 276.99 yuan.

The most-active gold contract for December delivery on the Shanghai Futures Exchange closed up 1.4% at 276.55 yuan.

“Worries over inflation are a major factor pushing up gold prices. In addition, there is the seasonal boost in demand from countries including China and India,” said Zhu Yilin, general manager of the research and development department of Jingyi Futures in Shanghai.

Spot silver rose to $20.52 an ounce, the highest in two and a half years, before easing to $20.46 an ounce.

Platinum hit $1,601.5 an ounce, the highest since June 21, before softening to $1,588.5, up 0.1% from the previous close.

Palladium was little changed at $549.5, after having hit $553, the highest since end-April. – Reuters

Tags: vietnam gold, Vietnam gold market, Vietnam gold prices