Gold prices hit one-week high in early trading
Gold prices today rose by more than 1 percent during early trading in Singapore, hovering near their highest in more than a week amid strong demand for bars, coins and nuggets.
Premiums for gold bars have jumped to multi-year highs in Asia because of strong demand from the physical market, which has led to a shortage in gold bars, coins, nuggets and other products.
Recent bleak U.S. growth data that raised hopes the Federal Reserve would keep its current pace of bond buying at $85 billion a month also supported gold, which is widely seen as a hedge against inflation.
U.S. gold futures, which often provide trading cues to cash gold, hit a high of $1,472.20 an ounce. By 5.53am GMT, prices stood at $1,468.90 an ounce, up $15.30. Spot gold rose $6.70 to $1,469.20 an ounce.
Both cash gold and futures sank to around $1,321 on April 16, their lowest in more than two years, after a drop below $1,500 sparked a sell-off that prompted investors to slash holdings of exchange-traded funds. They touched an 11-day peak above $1,484 on Friday.
"I don't think gold is out of the woods yet, but there's room for upward correction. One of the reasons why gold has dropped so much was the strong signs of U.S. economic recovery. Now, we don't see much of it," said Joyce Liu, an investment analyst at Phillip Futures in Singapore.
"But investors are still roiled by the very recent tumble. The question is how sustainable is this physical buying, because at the same time, we are still seeing funds flowing out of gold. Retail investors won't be buying gold in hundreds of millions of dollars like the funds."
Holdings on the largest gold-backed exchange-traded fund (ETF), New York's SPDR Gold Trust, continue to fall, in a sign investors have yet to regain confidence in gold. The holdings are now at their lowest since September 2009.
The massive decline in gold prices this month signaled an end to the bull run in the precious metal.
Jeff Rhodes, the global head of precious metals and chief executive of INTL Commodities at the Dubai Multi Commodities Centre (DMCC), told Al Arabiya earlier this month that the collapse in gold “probably does signal the end of the bull market”.
Markets saw record trade in the precious metal, amid the global price slumps.
Trading on the Dubai Gold and Commodities Exchange (DGCX), which is part of DMCC, hit record volumes on April 16, according to officials from the exchange. The DGCX saw the highest ever overall daily trading value of $3.8 billion, with a record 103,126 contracts.
“We are delighted that DGCX has crossed the 100,000 contracts benchmark in daily trading volumes,” Gary Anderson, chief executive of the DGCX, told Al Arabiya.
“Over the rest of 2013, we are looking to expand our product portfolio and further enhance our contracts based on market feedback.”