Friday, May 1, 2009

>Spot gold trading lower; equities weigh

London - Spot gold prices traded lower in Europe Thursday weighed by higher equity markets and weak demand for the precious metal, and analysts said both indicate prices could trade lower in the weeks ahead.

European stocks opened higher Thursday due to increased risk appetite after the U.S. Federal Reserve's upbeat outlook on the economy Wednesday boosted investor confidence.

At 0942 GMT spot gold was trading at $888.60 a troy ounce, down 1% from Wednesday's close. Spot silver was at $12.59/oz, down 1.3%. Spot platinum was at $1,104.50/oz, up 0.9%. Spot palladium was at $218.50/oz, unchanged from the close.

"Investors are becoming more confident that we will have a recovery this year and that is weighing on gold," said Commerzbank analyst Eugen Weinberg.

Weinberg said gold prices could trade down to $800/oz in the summer before trading back above $1,000/oz next year when inflation could again be in focus.

For now, jewelry demand remains weak and investor exchange traded fund buying is stagnating, Weinberg said.

Daily data from the SPDR Gold Trust fund, the largest gold exchange-traded fund, showed gold holdings were unchanged for a fourth day at 1,104.45 metric tons, despite this week's drop in prices.

"The only reason for the rise in the last month was investor demand," Weinberg said.

Gold prices have been range trading but technical indicators suggest the precious metal will have a "breakout," said FuturesTechs analysts.

Volatility is contracting significantly and "this usually happens ahead of a breakout - like pressure building up on a Champagne Cork," FuturesTechs said.

In other news, Japan's auto production in March fell by 50%, making it the sixth straight month of declines. The auto industry is a key consumer of platinum and palladium for use in catalytic converters.