Gold prices held steady around $1,745 an ounce on Wednesday, as investors waited with caution for Greece to grind towards a deal on a rescue package that it urgently needs after missing a string of deadlines. Athens tested investor's patience yet again on Tuesday by postponing a decision on whether to accept austerity and reform measures in exchange for a 130 billion euro ($172 billion) bailout from the IMF and EU.
Gold could face a short-term pullback if Greece strikes a deal, as it may hurt the appeal of safe-haven assets, but in the long run the lingering euro zone debt crisis is expected to support sentiment in gold. "If Greece were to agree on everything right away, I don't think it would solve everything because they will still have to implement the measures," said Jeremy Friesen, commodity strategist at Societe Generale in Hong Kong. "There are plenty of land mines left." Spot gold was little changed at $1,746.09 an ounce by 0329 GMT, after rallying 1.5 per cent in the previous session. US gold inched up $1 to $1,749.40. Friesen said the uncertainty in Europe and the shadow it casts on the global economy will buoy gold, as central banks around the world are expected to promote accommodative monetary policies to spur growth. But the risk in Europe would make it difficult for other commodities to stage a sustained rally over the next few months, he added. Technical analysis suggested that spot gold could fall to $1,729.51 an ounce during the day, Reuters market analyst Wang Tao said.
The drop in bullion prices to below $1,710 in the previous session prompted some physical buying in Asia, but purchasing interest ebbed and scrap selling emerged as prices moved towards $1,750, seen as a key resistance, dealers said. Premiums on gold bars in Singapore stood around $1 an ounce over London prices, said a Singapore-based dealer.
The gold-silver ratio, which measures how many ounces of silver is needed to buy an ounce of gold, hovered above a three-month low of 51.10 hit in the previous session. For most part of 2011, the ratio was below 46, compared to a near 30-year average of 64. Spot silver edged down 0.2 per cent to $34.08 an ounce, leading the precious metals complex with a 23-per cent gain so far this year. Edward Meir, an analyst at INTL FCStone, said silver is facing heavy resistance around $35.70, near a previous high hit in late October. "Should silver take out this level, we will be in a technical breakout stage, possibly setting the complex up for a push to the $40 mark," he wrote in a research note.