Gold steady after China data, euro zone summit eyed

Gold steady after China data, euro zone summit eyed

Last Updated: Thu, Oct 18, 2012 04:14 hrs
A worker attends at his shop for a gold jewellery at the market of Khan el-Khalili in Old Cairo

Gold traded flat on Thursday, retaining gains from the previous two days, as investors looked for fresh leads from a European Union summit after shrugging off data showing China's economy slowed for a seventh quarter as expected.

European leaders will gather for a two-day meeting amid talks that Spain will seek a bailout next month, as the bloc continues its struggle with the debt crisis.

Gold has closely followed the moves in the currency market, with improving sentiment around the euro zone giving support to the euro and weighing on the dollar, making dollar-priced commodities more attractive for buyers holding other currencies.

China's economy slid into its seventh straight quarter of slowdown in July-September quarter, growing at 7.4 percent on the year as expected, and Beijing said the country will be able to beat or exceed the annual growth target of 7.5 percent.

Investors have expected more policy clarity from Beijing after the leadership transition next month among speculation that China will launch more stimulus measures to help boost growth.

Prices of bullion dipped to below $1,730 earlier in the week under the pressure of uncertainty over Spain's bailout plan and improvement in U.S. economic data which triggered concerns about the extent of the latest stimulus measures.

"In the short term, the $1,730 support level will continue to feel a lot of pressure as investors focus on the euro zone summit," said Chen Min, an analyst at Jinrui Futures in the southern Chinese city of Shenzhen.

"But beyond that, gold's outlook is still bullish thanks to support from the easing measures by central banks."

Spot gold traded nearly flat at $1,750 an ounce by 0320 GMT.

U.S. gold also was little changed at $1,751.50.

"Some buyers are coming back, thinking the sell-off is over," said a Hong Kong-based trader. "But we may see another correction since the positioning in gold is still very high."

Net length in U.S. gold hit a 14-month high of 198,194 contracts last week, more than doubled from this year's trough in late-July.

Holdings of gold-backed exchange-traded funds stood at 74.804 million ounces, not far off a record of 75.03 million ounces hit last week, suggesting strong investment demand in gold.

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