Spot gold hit a session high just short of $1,680 per ounce on Monday, fueled by a stronger euro, after Federal Reserve Chairman Ben Bernanke said the U.S. labor market was “far from normal,” despite recent improvement.
Spot gold [XAU= 1686.0601 23.92 (+1.44%) ]rose 1 percent to $1,679.39, with some hoping the Bernanke comments might be a hint at further quantitative easing.
U.S.gold [GCCV1 1683.90 21.50 (+1.29%) ]for April delivery was up 0.3 percent at $1,667.20.
Bullion prices posted the biggest one-day rise so far this month on Friday, reflecting higher oil prices and a sharp fall in the dollar as a result of disappointing U.S. housing market data.
Money managers in U.S. gold futures and options cut their bullish bets for a third straight week to the weakest level in two months as bullion prices tumbled after a strong run of U.S. economic data triggered fund selling.
Physical demand fromIndia, the world’s largest bullion buyer, remains a concern with a jewelers’ strike entering its second week after the government announced a hike in import duty on bullion.
The U.S. dollar index [.DXY 79.07 -0.25 (-0.32%) ] edged up from a two-week low hit on Friday, dampening sentiment on dollar-priced commodities by making them more expensive for buyers holding other currencies.
“There’s a good chance we’ll see a relapse in U.S. data since the economy is in a fragile recovery, which will lead to speculation on more quantitative easing, and that is positive for gold,” said Hou Xinqiang, an analyst at Jinrui Futures in the southern Chinese city of Shenzhen.
Hou said oil prices are unlikely to slide easily from current high levels given the sticky situation in Iran, another supportive factor for gold. Investors will closely watch changes in holdings of various physically backed exchange-traded funds in the last week of the quarter. The SPDR Gold Trust[GLD 163.75 2.2171 (+1.37%) ], the world’s biggest gold ETF, said its holdings fell 0.8 percent last week, the biggest weekly decline since late December.
This week, investors will also monitor key economic data fromGermany, bond auctions inItaly, and a meeting of euro zone finance ministers, during which the size of a bailout firewall is to be discussed.