Gold steadied below $1,200 an ounce on Friday and was set to end a two-week rally as the dollar firmed on expectations that the US Federal Reserve is on course to raise the interest rates next year.
But some buying interest from Asia may be supporting bullion at current levels, traders say, allowing it to hold up despite rising equity markets.
A surge in gold prices to above $1,230 an ounce last week from around $1,140 a week earlier has spurred caution among investors, said Yuichi Ikemizu, branch manager at Standard Bank in Tokyo.
“People are not overly bearish anymore. They have learned their lesson when gold rallied sharply so they’re not bold enough to go short around these levels,’’ he said.
Spot gold
Spot gold was little changed at $1,198.20 an ounce by 0147 GMT. Bullion has lost nearly 2 per cent so far this week, after rising in the past two.
That fall was largely on account of Monday’s 2.5-per cent drop — its deepest this year — amid worries over rising US interest rates in 2015.
Fed rate hike
The Fed, after wrapping up a two-day meeting on Wednesday, signalled that it was on track to increase the rates next year but said it was taking a patient stance, allowing gold to erase some of its losses.
US gold for delivery in February gained 0.3 per cent to $1,198.70 an ounce.
“Gold prices are currently capped by a stronger dollar and ongoing weak oil prices. Equity market gains further reduce the appeal of alternative assets like gold. Despite this, gold keeps challenging the $1,200/oz level,’’ HSBC analysts said in a note.
In India, gold importers are offering a discount of $2 an ounce versus London prices for the first time in almost five months due to excess market supply.
Importers generally charge a premium over London prices but demand in the world’s second-biggest gold consumer is expected to fall sharply this month after shipments surged in the past three months.