Gold eases as Egypt rally loses steam

31/01/2011 00:00 AST

Gold eased on Monday after posting its largest daily gain in eight weeks on Friday and while the market did encounter some safe-haven buying on the back of the unrest in Egypt, this was expected to be temporary.

Gold is set for its worst monthly performance since December 2009, driven down by the improving tone of some key U.S. economic data, growing investor confidence and a near-record decline in holdings of metal in exchange-traded funds.

Even a 2.6 percent fall in the dollar index .DXY has not lifted gold, as the traditional negative correlation between the two has reached its most positive since mid-September.

Spot gold was last quoted at $1,332.91 an ounce by 10:40 a.m. British time, down 0.4 percent, having hit four-month lows last week at $1,308.00. U.S. April gold futures were last down 0.6 percent at $1,334.10.

Scenes in Egypt, where protesters were camped out in central Cairo on Monday, vowing to stay until they had toppled President Hosni Mubarak, have encouraged some safe-haven buying of gold, although this support is unlikely to last long, analysts said.

"What we've seen is (Egypt) has limited the downside more than anything," said VTB Capital analyst Andrey Kryuchenkov.

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Reuters

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