Thursday, 7 July 2016

Gold Extends Gains even as Asian Shares Bounce Back

Gold rose for a seventh straight session on Thursday after touching its highest in more than two years in the previous session as investors are still seeking safe-haven assets even as stock markets bounced back in Asian trade.Asian equity markets crept higher on Thursday after upbeat U.S. economic data took some of the sting out of the latest Brexit scare, while the Australian dollar slipped as the country's triple A credit rating came under threat.Wall Street got a boost from Institute for Supply Management data showing U.S. service sector activity hit a seven-month high in June as new orders surged and companies hired more workers.Spot gold, which touched its highest since March 2014 at $1,374.91 on Wednesday, was trading up 0.3 percent at $1,367.45 an ounce by 0402 GMT.U.S. gold was up 0.2 percent at $1,369.70."Everyone is waiting for the U.S. non-farm payroll data for June due on Friday. Hence, not many people are trading and hence prices are stable," said William Wong, assistant head of dealing for Wing Fung's precious metals desk.

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Investors will be watching out for the data following a slowdown in hiring during May. A further weakness in hiring could be an indication that the U.S. Federal Reserve may not raise interest rates anytime soon amid the economic uncertainty following the Brexit vote.Fed policymakers in June decided that interest rate hikes should stay on hold until they have a handle on the consequences of Britain's vote on EU membership, according to the minutes from the Fed's June policy meeting released on Wednesday.Gold is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar, in which it is priced.

The immediate resistance for gold is on the topside of $1,375.50 an ounce while immediate support lies around $1,365 and then $1,357-58, MKS Group trader James Gardiner wrote in a note.Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.03 percent to 982.44 tonnes on Wednesday. Silver was up 0.3 percent at $20.13.

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