Gold prices turned lower on Tuesday as the dollar firmed after a Federal Reserve policymaker voiced concern about US monetary stimulus, but prices held in a range as traders turned their attention to the December Comex options expiry later in the day.
The dollar pushed back into positive territory on Tuesday after a Fed policymaker's comments boosted the US currency, having earlier slipped to a one-month low against the euro after international lenders agreed a new debt target for Greece.
Federal Reserve Bank of Dallas President Richard Fisher voiced concerns at a conference in Berlin about the Fed's quantitative easing programme.
Spot gold was down 0.12 percent at $1,746.39 an ounce by 13:45 SA time, having earlier touched a session high at $1,751.40. US gold was down 0.18 percent at $1,746.40.
“Gold is trying to consolidate now after making the push higher on Friday,” Saxo Bank analyst Ole Hansen said. “A lot of new longs have come to the market and are looking to hold and stabilise around the $1,735-1,740 area.”
“We are creating the foundation for a push higher to levels seen earlier this year,” he said. Gold rose to a high of $1,795.69 an ounce in October after the Fed announced a third round of US quantitative easing, a means of monetary stimulus.
QE, which basically translates into money printing to buy bonds, tends to boost gold as it undermines the dollar, fuels inflation expectations, and maintains pressure on long-term interest rates.
Dealers focused on Tuesday's December Comex options expiry, with the bulk of open interest concentrated in $1,800 calls, which give holders the right, but not the obligation, to buy gold at that level.
“For calls, the bulk of open interest rests at the $1,800 strike, with more than 3.2 million ounces,” said UBS in a note. “With OI so high, could today be the day that gold gravitates closer to the much coveted $1,800 level?”
Another heavy concentration of open interest in both call and put options at $1,750 could keep gold from straying too far from its current level.
In the longer term investors remain focused on the US fiscal crisis. Uncertainty over whether the US will slide into a deep recession next year if a deal on spending cuts and tax rises cannot be reached has helped to underpin gold prices.
Republicans in the US Congress on Monday called on President Barack Obama to detail long-term spending cuts to help solve the country's fiscal crisis, while holding firm against the income tax rate increases for the wealthy that Democrats seek.
Gold buyers in major gold consumer India stuck to the sidelines as prices steadied near their highest in more than two months. The lull came despite that fact that the wedding season, when demand for the metal normally goes up is now underway in India and will continue until early January.
“There are no buyers at these levels,” Mayank Khemka, managing director of Khemka Group, a bullion wholesaler in New Delhi, said. “There are a few investors who are selling and booking profits.”
Hedge funds and money managers raised their bullish bets on US gold futures and options to a four-week high of 148,630 lots in the week ended Nov. 20, said the US Commodity Futures Trading Commission (CFTC).
From a technical perspective, gold is well supported above its current 50-day moving average at $1,739, a level of previous strong resistance, analysts who study past chart patterns to determine the outlook for trade said.
Net length in US silver rose the a one-month high of 33,317 contracts, the CFTC said. Spot silver rose to $34.26, its highest since Oct. 11, before easing to $34.02.
Spot platinum was up 0.09 percent at $1,610.2 an ounce, while spot palladium was up 0.64 percent at $664.72 an ounce. - Reuters