Gold steady after US data; eyes on Fed

SINGAPORE: Spot gold held steady on Thursday, as investors weighed the possibility of further easing moves by the US Federal Reserve after better-than-expected manufacturing and labour market data.

After recent data showed plunging consumer confidence, Thursday's batch of numbers suggested a strong rebound in demand for manufactured goods in July and increasing hiring from private employers, easing fears the economy would slip back into recession.

Investors are closely watching a key Fed policy meeting starting Sept. 20 for clues to whether the central bank might launch more stimulus measures for the economy.

"Some investors have left the safe haven assets, such as gold, for the stock market with hopes that the Fed will announce more stimulus," said a Tokyo-based dealer, "as increased liquidity and improved economic prospects are expected to lift share prices."

Global stock markets have gained strength in recent days, rebounding from several weeks of losses. In comparison, gold climbed 12 percent in August, but has been seesawing around $1,800 for the past few sessions.

Another round of government bond-buying would also buoy gold, as it would lift the inflation outlook, and interest in bullion, as a good hedge against inflation.

Spot gold was little changed at $1,824.54 an ounce by 0238 GMT, up 29 percent so far this year. It hit a record high of $1,911.46 on Aug. 23.

US gold edged down 0.2 percent to $1,827.60 an ounce.

Gold is faced with strong resistance at $1,840 and silver at $42, said the dealer.

"Neither gold nor silver has enough momentum to break higher after they fell off the recent highs," he said.

Spot silver gained 0.4 percent to $41.64 an ounce, down more than 5 percent from a 3-1/2-month high of $44.14 hit on Aug. 23.

Data due later on Thursday includes jobless claims, construction spending and the ISM manufacturing index from the United States, and the manufacturing Purchasing Managers' Index (PMI) from the euro zone.

China's factory activity rebounded a touch in August from a 28-month trough, but tight monetary policy at home and torpid demand abroad has dimmed chances for a sustained recovery.

The turbulence in financial markets and cloudy global economic outlook have pushed many investors to seek safe haven in precious metals, driving gold up more than 20 percent in the past two months.

Although in the short term gold could face correction after the strong rally, long-term sentiment is underpinned by a number of factors including low US interest rates, stubborn inflation in emerging economies and a lingering euro zone debt crisis.

"The uncertainty clouding the macro outlook has lifted gold prices, and as long as it persists and investors remain responsive to gold, barring short term corrections, prices are set to venture further into uncharted territory," Barclays Capital said in a research note.

Also supporting the sentiment, central banks continued to buy gold despite record high prices. Russia added 4.42 tonnes to its gold reserves in July, while Colombia bought 2.3 tonnes of gold in its first purchase since March 1998.

Copyright Reuters, 2011