Picture: REUTERS
Picture: REUTERS

LONDON — Gold fell further from this week’s one-month high on Wednesday as the euro slid to session lows versus the dollar, with signs of improving global economy, after strong euro area economic figures, capping investors’ interest in the metal.

The latest eurozone consumer confidence data showed a rise to -23.9 this month from a December figure of -26.3, suggesting households can help boost the bloc’s economic recovery.

Spot gold fell 0.2% to $1,688 an ounce by 3.34pm GMT. It hit a one-month high of $1,695.76 in the previous session but failed to retain upward momentum on lower investment demand and technical resistance.

"We can see rather lacklustre interest for gold right now, with investors withdrawing some money from the gold market (as the global economy shows signs of improvement)," Tobias Merath, global head of commodity research at Credit Suisse said.

"At the moment there is also a bit of portfolio effect going on as gold’s returns in 2012 moderated to 7% from 18% in the previous ten years and were than returns in equities," he added.

"This implies that investors are trimming their positions in gold to adjust their portfolios, preventing the metal from breaking above the key $1,700 level." The SPDR Gold Trust, the world’s top gold ETF, has seen an outflow of nearly 15 tons so far this year.

Recent monetary easing in Japan had triggered rallies in equities, which gold has tracked closely in the past days.

Accommodative policies are usually seen as positive for gold, as rampant cash printing would prompt currency debasement.

"We continue to see a lot of monetary easing from the Bank of Japan and other central banks, and we think ultimately this will pick up gold sentiment once again," said Standard Bank analyst Walter de Wet.

But gold stalled below $1,700 an ounce in early January and has struggled to break through key resistance at the 55-day simple moving average of $1,695.50, which has capped prices for the last five sessions, frustrating buyers.

"You have the high from January 2 which is $1,695, you have the 55-day simple moving average which has capped it for the last five days at 1695.50," Axel Rudolph, a technical analyst at Commerzbank, said.

"That whole band basically just seems to cap gold. Although it’s trying to go higher, it’s failed every single time around here," he said.

Indian buying slackens

Demand in the physical gold market remained strong in the south-east Asian region, but buying by major consumer India was expected to pause in the next few days while the government provides details on tax changes this week, analysts said.

The Indian government lifted the import duty on refined gold to 6% from 4% and more than doubled the import duty on gold dore bars and ores.

Spot silver rose to a five-week high of $32.44 an ounce, extending a seven-day run higher. It was last seen at $32.18, unchanged from the previous close.

"Silver has outperformed gold year-to-date and its market’s supply surplus is being taken up by investors, who tend to buy the metal when risk appetite is on the rise," Mr Merath said.

"We expect further upside for the metal in the short term," he added.

A robust inflow into silver-backed exchange-traded funds has helped spot silver prices rally more than 6% so far this year, as the metal’s exposure to a quickened pace of economic growth attracted investors.

Holdings of iShares Silver Trust, the world’s largest silver ETF, stood at 10,689 tons on January 22, up 604.9 tonnes, or nearly 6%, from the end of 2012.

In other precious metals, spot platinum was down 0.3% to $1,688.49, while palladium lost 0.1% to $722.97, staying below last week’s multi-month highs, made on the back of output cuts in South Africa and hopes for an improvement in demand.