Gold edges higher ahead of ECB loan offer

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Gold edges higher ahead of ECB loan offer

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Technical analysis suggested that spot gold still aims at $1,797 during the day.

29 February,2012 11:18 am

Gold edged higher on Wednesday, after rallying 1 percent in the previous session, supported by expectations for more cheap loans to be offered by the European Central Bank later in the day.Cash gold was on course for a monthly gain of 2.6 percent in February ahead of the expected injection of nearly half a trillion euros by the ECB, seen as designed to buy more time for European politicians to resolve the regions debt woes.There is so much cheap money around, said Ronald Leung, a dealer at Lee Cheong Gold Dealers in Hong Kong.The momentum is still there and may push gold to $1,815-$1,820, with expectations that central banks will further relax their policies.Easy monetary policy raises the inflation outlook and benefits gold, traditionally seen as a good inflation hedge. The access to sufficient cheap credit also keeps down the opportunity cost of carrying non-yielding bullion.Spot gold inched up 0.1 percent to $1,786.06 an ounce by 0315 GMT, after hitting $1,789.40 on Tuesday, its highest levelsince mid-November.U.S. gold was little changed at $1,787.80.The euro held its ground and the greenback edged lower against a basket of currencies, giving support to dollar-priced commodities as they become more attractive to buyers holding other currencies.Technical analysis suggested that spot gold still aims at $1,797 during the day, Reuters market analyst Wang Tao said.Spot silver barely moved at $36.90 an ounce, after surging 4 percent and reaching a five-month high of $37.21 in the previous session.The gold-silver ratio dropped to its lowest level in five months, after silver rose more than 11 percent so far this month and a whopping 33 percent this year, outperforming the other precious metals.Silver looks more positive than gold for the time being, but its not related to rising physical demand, said a Hong Kong-based dealer, adding that there was a slight pickup in scrap selling and investor buying as prices rose.On the chart, spot silver could rise to $43.97 over the next four weeks, indicated as the 76.4 percent Fibonacci retracement level on the fall from a record high near $50 to a low above $26 hit in September, said Reuters Wang.The relative strength index stood above 77, its highest level since last April, indicating the market has become overbought.Spot platinum rose 0.4 percent to $1,721.24.Impala Platinum (IMPJ.J), the worlds second-largest platinum producer, said on Tuesday the costs of an illegal strike at its key Rustenburg operation in South Africa have reached 100,000 ounces and a loss of income of 2 billion rand ($263.66 million).