Gold Heads for Biggest Monthly Gain Since July

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February 28, 2014 8:03 PM EST

Gold was little changed on Friday but was on track for its biggest monthly gain since July after investors and speculators chased prices higher on concerns about the pace of the U.S. economy and unrest in Ukraine.

Reuters
Gold Demand Fell 15 Percent in 2013 - WGC

Recent gains, though, may be hard to sustain in the absence of strong physical buying. And expectations of the U.S. Federal Reserve continuing to reduce its stimulus programme could dent gold's appeal as a hedge against inflation.

Cash gold was nearly flat at $1,330.86 an ounce by 0714 GMT, down from a four-month high of $1,345.35 struck on Wednesday. Gold has gained 7 percent in February, its biggest monthly rise since the 7.2 percent added in July.

"The physical market in Hong Kong is still very slow and I can't see any fresh buying interest," said Peter Fung, head of dealing at Hong Kong's Wing Fung Precious Metals.

"Sentiment in the market is neutral from here. Resistance is at $1,350, while on the downside, $1,300 should be the support," Fung said.

Premiums for gold bars in Hong Kong dipped to $1 an ounce to

the spot London prices from as high as $1.70 last week, which reflected a slowdown in demand from China.

Weakening differentials between 99.99 percent purity gold on the Shanghai Gold Exchange and cash gold discouraged imports. On Friday, the Shanghai market was trading at discounts to almost on par with cash gold.

U.S. gold was also little changed at $1,331.40 an ounce.

Unusually harsh winter weather appears to be behind recent signs of weakness in the U.S. economy, Federal Reserve Chair Janet Yellen said on Thursday, suggesting the central bank was poised to press forward in ratcheting back its stimulus.

The Fed's stimulus programme has pushed money into riskier assets such as commodities and stoked inflation fears.

The physical market was equally quiet in Singapore, a centre for bullion trading in Southeast Asia.

"The $1,300 to $1,350 trading range is small yet tough. There's a lack of direction, which could push gold prices either way, downward or upward," said a physical dealer in Singapore.

In other markets, Asian stocks managed to shrug off early losses on Friday and push higher, inspired by gains on Wall Street after Yellen's comments underscored her confidence in the U.S. economy.

An unexpected rise in U.S. durable goods orders, excluding transportation, also helped distract investors from an increasingly unstable situation in Ukraine.

Ukraine's interior minister said on Friday Russian forces had taken control of two airports in the Crimea region and condemned them an armed invasion and occupation.

Precious metals prices 0714 GMT

Metal Last Change Pct chg YTD pct chg Volume

Spot Gold 1330.86 -0.20 -0.02 10.45

Spot Silver 21.26 0.02 +0.09 9.53

Spot Platinum 1444.99 -2.08 -0.14 5.67

Spot Palladium 741.22 2.82 +0.38 3.96

COMEX GOLD APR4 1331.40 -0.40 -0.03 10.78 16557

COMEX SILVER MAR4 21.25 -0.06 +0.00 9.71 205

Euro/Dollar 1.3715

Dollar/Yen 101.82

(Photo: Reuters / )
Gold Demand Fell 15 Percent in 2013 - WGC
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