Asia Gold-Record prices trigger selling; bullish outlook intact

Wednesday, 20 April 2011 00:00 - - {{hitsCtrl.values.hits}}

SINGAPORE, (Reuters) - Record gold prices triggered some selling in the Asian physical market, as investors sought to profit from high prices but remained confident of further upside in bullion prices.

Spot gold rose to a record high just below $1,500 on Monday, after Standard & Poor’s threatened to downgrade the credit rating of the United States amid worries over a lingering sovereign debt crisis in the euro zone.

“We see some selling interest today on profit-taking, but not in large volume,” said a Hong Kong-based dealer. “The market is still bullish on gold as a safe haven.”

Premiums for gold bars in Hong Kong were quoted in the range of 50 cents to $1.50 an ounce above London spot prices, dealers said.

The global economic outlook was clouded by worries over high oil prices, as well as the ongoing nuclear crisis in Japan following last month’s devastating earthquake and tsunami.

“The euro zone still has debt problems here and there, the U.S. is facing a credit downgrade, the Chinese are facing high inflation -- people are worried about the situation and will want to hold physical gold,” said Dick Poon, manager of precious metals at Heraeus in Hong Kong.

Investment buying from China remained strong, as Beijing vowed to use every tool at its disposal to fight stubborn inflation. Consumer prices rose by 5.4 percent on the year in March, its biggest rise in 32 months. [ID:nLDE73E0A2]

Jewelers’ activities have slowed down as they approach the seasonal lull in summer, said Poon of Heraeus.

But more buying is expected to occur in the region if prices drop towards $1,480, after gold rallied about $40 over the past week, dealers said

Markets in Hong Kong and Singapore, regional gold trading hubs, will be closed on Friday on a public holiday.

Hong Kong markets will remain closed on April 25.

Activities on Japan’s physical market were muted, with a small amount of selling spotted, said a trader at a bullion house based in Tokyo.

“Japan’s physical gold market activities will depend on moves in the currency market. If the Japanese yen moves below 80 (versus one dollar), gold buying will pick up,” he said.

Gold bars in Tokyo were quoted at a discount of 20 to 50 cents an ounce compared to London spot prices, he added.

This compared with a nearly $3 premium a month earlier, when investors rushed to buy gold after the Japanese yen jumped to a record versus the dollar in response to the earthquake.