Gold Slumps After Four-Day Rally

Markets Reuters

Is Gold Hitting Bottom?

Rogers Holdings chairman Jim Rogers gives his outlook for the gold market.

Gold eased on Friday, as the dollar rebounded and investors booked profits after four days of gains, putting it on track for its biggest weekly gain in nearly two years on easing fears of an early end to the U.S. Federal Reserve's monetary stimulus.

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Bullion had taken a beating after Fed Chairman Ben Bernanke said in May and June that the U.S. economy was recovering strongly enough to slow the pace of the $85 billion of monthly bond purchases.

The tapering would support a rise in interest rates and bolster the dollar, reducing gold's attractiveness.

But the tone of the central banker's language became more doveish on Wednesday, when he suggested the bond purchases could last longer. And minutes from a June Fed meeting showed officials were divided over when to end the stimulus.

Spot gold fell 0.6 percent to $1,276.71 an ounce by 1006 GMT. Bullion has gained close to 5 percent this week, on course for its biggest weekly climb since October 2011, after hitting a near-three week high of $1,298.36 on Thursday. Analysts said the metal now faces strong resistance crossing the $1,300 level, while support stands at $1,270.

Comex gold futures for August delivery also retreated from a two-and-a-half week high near $1,300 hit in the previous session to $1,275.50 an ounce, down $4.40.

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"We are certainly seeing some profit-taking and some strength in the dollar today," VTB Capital analyst Andrey Kryuchenkov said.

"We may remain rangebound below $1,300 for the time being because there are no crucial macro events in the next few weeks and we remain unclear on QE3 (the current round of bond buying stimulus)."

The dollar reclaimed some lost ground after falling for most of the week, while European shares were also heading for multi-month weekly gains.

"Stock markets are strong and that seems to be where the money is going and quite frankly, trying to make an argument to get into precious metals at the moment is fairly hard," Marex Spectron chief trader David Govett said in a note.

Many still expect gold to end lower this year as investors jump to rallying stocks, dumping holdings in gold-backed exchange traded funds, and physical demand slows as refineries start shutting for house-keeping during the summer.

"Sentiment has not changed towards gold and investors are still reluctant to step in, while physical buyers remain sidelined," Kryuchenkov said.

Holdings of the world's largest gold-backed exchange-traded fund SPDR Gold Trust remained unchanged at four-and-a-half year lows of 30.192 million ounces on Thursday. The fund posted the biggest weekly loss of 2.6 percent since the end of April.

Investors pulled $998.8 million from commodities and precious metals funds, up from withdrawals of $92.6 million in the prior week, data from Thomson Reuters' Lipper service showed on Thursday.

Silver fell 1.4 percent to $19.81 an ounce, having reached a three-week high of $20.26 on Thursday. Platinum was down 0.2 percent to $1,401.99 an ounce and palladium gained 0.1 percent to $717.22 an ounce. (Additional reporting by A. Ananthalakshmi in Singapore; editing by Keiron Henderson)