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Gold near 5-month top after ECB boost, eyes 3rd weekly gain

ECB’s bold move also fuelled risk appetite, with Asian stocks stretching a rally in global equities.

Published: Updated:

Gold steadied above $1,300 an ounce on Friday, near its strongest level in five months, after the European Central Bank launched a multi-billion bond-buying program to invigorate the euro zone economy.

The precious metal, seen as a hedge against inflation, jumped on Thursday after the ECB said it would purchase 60 billion euros ($68 billion) a month until September 2016.

ECB’s bold move also fuelled risk appetite, with Asian stocks stretching a rally in global equities.

Gold’s gains came despite a slide in the euro which analysts say also attest to the metal’s safe-haven draw. The single currency is wallowing near 11-year lows against the dollar.

“Despite gold’s historical positive correlation to the euro, the scope for further euro losses would provide a boost for bullion, in our view, based partially on gold’s appeal as a perceived safe haven asset along with gold being a currency that you cannot print more of,” said HSBC analyst James Steel.

Gold may have room to rise further in the near term, said Steel, but to do so it may need to be able to defend $1,300, a level that could discourage some price-sensitive buyers in emerging markets.

Spot gold has risen nearly 10 percent so far this year, rebounding from a small loss in 2014. It was little changed at $1,300.24 an ounce by 0240 GMT, after hitting a session high of $1,302.50.

The precious metal peaked at $1,306.20 on Thursday, its highest since Aug. 15, and was headed for a third straight weekly gain.
U.S. gold was also steady at $1,300.40 an ounce.

Euro-priced gold was trading at 1,143.15 euros an ounce, after rising as high as 1,150.47 euros overnight, its highest since April 2013.

The next key events for the market would be Sunday’s snap election in Greece and next week’s U.S. Federal Reserve policy meeting as the U.S. economy continues to show signs of strength.

Still, the global economic uncertainty as well as positive chart patterns should keep gold higher, with $1,320 and $1,350 both “achievable upside targets”, said INTL FCStone analyst Edward Meir.

Outside Europe, China is also facing a tough year after its economy expanded at the slowest pace in 24 years in 2014. China’s manufacturing growth stalled for a second straight month in January and companies had to cut prices at a faster clip to win new business, a private survey showed.