Gold hits four-week high

LONDON – Gold steadied in Europe yesterday after rising to a four-week high earlier in the session as equities fell on concerns over the prospect of a global flu pandemic, which boosted interest in bullion as a haven.

The precious metal is also underpinned by technical factors after breaking above US$900 an ounce late last week and it has been boosted by news China has significantly increased its gold reserves, analysts said.However, gains in the dollar versus the euro are limiting gold’s climb.Spot gold was bid at US$911,40 an ounce in the morning, against US$911,10 an ounce late in New York on Friday. Earlier it touched a high of US$918,25.Saxo Bank senior manager Ole Hansen said traders would be watching how the wider markets such as equities react to the prospect of a flu outbreak.’If there is some worry that this will prolong the slump, or will increase the difficulties of the economy returning to some kind of shape…that might have an impact on gold,’ he said.World stocks tumbled yesterday after seven weeks of gains, while oil and the euro fell, as concerns intensified that the spread of swine flu will hit the global economy.Fears that any tentative signs of recovery in the global economy could be crushed by the virus, which has killed more than 100 people in Mexico, have put markets on edge.On the foreign exchange markets, the euro dropped 0,5 per cent versus the dollar, while the yen climbed to its highest in a month against the US currency.A stronger dollar typically weighs on gold, which is often bought as an alternative asset to the currency.Gold broke through the psychological US$900 barrier late last week, and was boosted on Friday by news that China has lifted its gold reserves by three quarters to 1 054 tons, against 600 tons at the time of its last report in 2003.POISEDThe news prompted speculation the bank could be poised for further purchases.’The possibility that China might increase its official sector gold holdings further is potentially supportive of prices,’ said HSBC in a research note.There were also signs of recovery in demand for physical gold. Dubai’s gold imports in the first quarter of the year grew 15 per cent to 140 tons from a year earlier, according to the Dubai World Group.Meanwhile gold buying in the world’s biggest gold consumer, India, was strong ahead of the wedding season there. However, a rise in prices has lifted selling of scrap jewellery back onto the market, dealers said.Demand for gold-backed exchange traded funds also remained stagnant. The largest gold ETF, New York’s SPDR Gold Trust, said its holdings were unchanged on Friday from the day before.Among other precious metals, spot platinum was bid at US$1 150 an ounce against US$1 173,50, while spot palladium was bid at US$230,50 an ounce against US$231.James Moore, an analyst for TheBullionDesk.com, said while platinum ETF holdings rose last week, ‘the PGMs could be in for a bumpy rise this week with restructuring deadlines from GM and Chrysler looming, as well as the release of US auto sales for April’.-Nampa-Reuters