Amid thinly traded session due to weeklong vacation in China, which is celebrating Chinese Lunar Year, gold prices extended losses during Asian trading hours on Monday as investors remain disinterested in safe haven bets in the backdrop of improving global macroeconomic environment. Silver prices also slipped in early trading on Monday.
At around 6:30 EST, gold futures for April delivery edged down 0.29% to $1,662 an ounce, while spot gold fell 0.33% to$1661.36 an ounce. Silver futures lost 0.64% to $31.24 an ounce.
Earlier on Friday, gold prices settled lower, posting very paltry weekly gains as investors, lately, have shunned poorly performing bullion market in favor of equities and other riskier assets—that have rallied in the wake of some better-than-expected economic data releases from both the U.S and China.
In this backdrop, gold is mainly tracking direction from fluctuations in the currency markets as safe haven bids and inflation hedge bids have dried out. Even though the Federal Reserve’s QE3 is on since September 2012, the fact that there is no inflationary pressure in some of the world’s major economies such as China, euro zone and the U.S is weighing on metal’s inflation hedge appeal.
Moreover, the euro zone’s crisis seems to have abated with hundreds of banks that borrowed money from the European Central bank (ECB) at the height of the crisis, are lining to up to return the money---underpinning increasing financial stability in the region, putting pressure on safe haven bets.
"I don't think there are many other influences in the market, certainly in the Asian market anyway, beyond currencies right now. So I think it's very much going to be the case of watch the dollar index," said Nick Trevethan, senior metals strategist at ANZ in Singapore, according to Thomson Reuters.
SPDR Gold Trust’s Holdings Fall
A data provided by Thomson Reuters showed that holdings of SPDR Gold Trust (ETF) (NYSE: GLD
), world’s largest gold-backed exchange traded fund, dropped 0.23 percent to 1326.89 tons on Friday from 1329.90 tons on Thursday.