Gold futures slipped a bit in electronic trading hours Tuesday, as signs of moderating demand from Chinese buyers and a relatively strong dollar kept investors cautious.
Gold for April delivery slipped $4.40 to $1,600.10 an ounce in Asia hours, struggling to cling on to the key $1,600 level.
In regular trading hours on Monday, gold futures ended down $1.60, or 0.1%, at $1,604.50 an ounce on the Comex division of the New York Mercantile Exchange, after trading as low as $1,588.40.
“Gold trimmed early losses as the Eurogroup president said the Cyprus bailout deal should be seen as a template for future bank bailouts,” noted metal analysts at HSBC, speaking about Monday’s deal between Cyprus and its international lenders to prevent a financial collapse in the country.
Investor concerns were raised, the analysts said, that troubled banks would be pushed to pursue uninsured deposits to fund bailouts should problems arise.
“Rising risks of confiscation has bullish ramifications for gold, in the longer term as investors may find the hard asset qualities of bullion more attractive than ‘riskier’ bank accounts,” the analysts said.
The ICE dollar index , which measures the greenback against a basket of six rivals, dipped to 82.840, from 82.886 in late trading on Monday, but remained well above Friday’s 82.387 level.
A stronger dollar tends to depress buying in dollar-denominated commodities such as gold, as it makes them less attractive to holders of other currencies.
HSBC said that gold trading in Shanghai may be another reason why investors in the metal could be tempted to take a cautious stance.
The analysts noted that gold’s premium on the Shanghai Gold Exchange now stands at only $4 an ounce, compared to nearly $20 an ounce earlier in the year.
“This indicates some moderation in China’s near term demand for bullion … strong emerging market demand is required to keep prices from falling given the reduction in investor demand for gold-exchange traded funds,” the analysts said.
Around the wider metals complex, silver for delivery in May edged down 10 cents to $28.72 an ounce, while copper for delivery in May traded flat at $3.45 a pound.
April platinum futures declined $7.80 to $1575,10 an ounce, and June palladium fell 15 cents to $757.20 an ounce.