Gold extended losses to a third session on Monday, falling as much as 1% as US President Barack Obama chose to seek Congressional approval before initiating any military action against Syria.
But silver rose 3.7% to $24.34 in late afternoon trading in Singapore as investors covered short positions. That, along with short-covering in bullion, helped gold pare some of its losses.
Spot gold was down 0.1% at $1,394.30 an ounce by 6.36am GMT, after earlier dropping to a one-week low. “Ever since the lows this morning, we have had some short-covering. People are using the opportunity to put out some long positions,” a Hong Kong-based trader said, referring to both gold and silver.
“The moves have been exaggerated by the lack of liquidity due to the US holiday,” the trader said. US markets are closed on Monday for the Labour Day holiday.
Gold had risen last week to its highest since mid-May as possible military action against Syria prompted safe-haven buying, but gave up some gains after British legislators voted against any involvement. “The easing tension in Syria have caused gold prices to dip,” OCBC Bank analyst Barnabas Gan said in Singapore. “Our base case scenario is that the Syrian issue will not blow up. We are still bearish on gold.” Prices for the metal could be expected to fall to $1,250 by year-end.
Mr Obama stepped back from the brink at the weekend and delayed an imminent military strike against Syria to seek approval from the US Congress in a gamble that will test his ability to project US strength abroad and deploy his own power at home.
Gold has gained about $200 an ounce from its June low of $1,180.71, largely on short-covering and technical buying, although it is still down about 17% for the year.
But with the drop below $1,400 on Friday, analysts expect further dips. Spot gold may pause near support at $1,376, according to Reuters technicals analyst Wang Tao.
Fed tapering
September is a key month for gold as many economists expect the US Federal Reserve to begin tapering its commodity-friendly stimulus measures. The Fed is due to start a two-day policy meeting on September 17.
A scale-back would hurt prices as easy central bank money pushed gold to a record high of about $1,900 in 2011. Recent US economic data have disappointed, indicating that the third quarter has not got off to a great start. “(Economic) indicators are still looking good, though not as favourable as we had hoped for,” OCBC’s Mr Gan said.
Source: Reuters
Source: Bullion Bulletin