By: Reuters
South Korea's central bank said it bought 25 metric tons of gold between June and July to diversify its foreign reserves despite high prices, marking its first purchase in more than a decade and taking its total gold holdings to 39.4 metric tons.
Gold edged higher on Tuesday, supported by a purchase of the precious metal by South Korea's central bank, while investors watched the outcome of a vote on the U.S. debt deal.
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"This news reiterates the fundamental view that most investors, asset managers, and even central banks hold true — that gold remains the quintessential currency hedge, a stabilizing asset for portfolios, and a safe haven in uncertain economic times," said David Meger, director of metals trading at Vision Financial Markets, a futures broker based in Chicago.
Market reaction to the news was muted, as investors continued to focus onthe U.S. debt ceiling deal, which is headed towards a congressional vote.
Spot gold [XAU= 1625.89
7.79 (+0.48%) 
] inched up 0.1 percent to $1,619.94 by 0245 GMT, off an intraday low of $1,607.69 on Monday.
U.S. gold [GCCV1 1628.60 6.90 (+0.43%) ] was little changed at $1,623.1.
"The Bank of Korea purchase is absolutely no surprise, because in the past two to three years we always heard that Asian central banks had been buying gold," said a U.S.-based trader.
"It is positive for the market, but more for long-term bulls."
Gold is expected to trade sideways during the day when investors weigh the outcome of the U.S. debt deal vote against the latest poor economic data, the trader added.
Market reaction to the news was muted, as investors continued to focus onthe U.S. debt ceiling deal, which is headed towards a congressional vote.
Spot gold [XAU= 1625.89
7.79 (+0.48%) ] inched up 0.1 percent to $1,619.94 by 0245 GMT, off an intraday low of $1,607.69 on Monday. U.S. gold [GCCV1 1628.60
6.90 (+0.43%) ] was little changed at $1,623.1. "The Bank of Korea purchase is absolutely no surprise, because in the past two to three years we always heard that Asian central banks had been buying gold," said a U.S.-based trader.
"It is positive for the market, but more for long-term bulls."
Gold is expected to trade sideways during the day when investors weigh the outcome of the U.S. debt deal vote against the latest poor economic data, the trader added.
U.S. manufacturing grew at its slowest pace in two years in July as new orders contracted, casting doubt on expectations the faltering recovery would quickly regain steam.
Risk appetite might return after the U.S. Congress passed the bill to raise the country's borrowing limit, but the gloomy economic outlook in the world's largest economy combined with an ongoing euro zone debt crisis could depress such sentiment, traders and analysts said.
"Gold should be lower after the U.S. debt ceiling deal is reached, but it remains firm as people don't trust the dollar and would still like to put their money in gold," said Peter Fung, head of dealing at Wing Fung Precious Metals based in Hong Kong.
The dollar pared early gains against a basket of currencies [.DXY 74.47 0.21 (+0.28%) ], while the safe-haven Swiss franc held firm on worries about the global economy, even as the United States appeared to have averted a debt default.
Risk appetite might return after the U.S. Congress passed the bill to raise the country's borrowing limit, but the gloomy economic outlook in the world's largest economy combined with an ongoing euro zone debt crisis could depress such sentiment, traders and analysts said.
"Gold should be lower after the U.S. debt ceiling deal is reached, but it remains firm as people don't trust the dollar and would still like to put their money in gold," said Peter Fung, head of dealing at Wing Fung Precious Metals based in Hong Kong.
The dollar pared early gains against a basket of currencies [.DXY 74.47
0.21 (+0.28%) ], while the safe-haven Swiss franc held firm on worries about the global economy, even as the United States appeared to have averted a debt default. South African gold mine workers and producers were to resume wage talks on Tuesday aimed at ending a strike that started last week.
"When prices are high, miners want to get a slice of the pie not just in South Africa, but in Chile and elsewhere, which could be a theme in the next few months as long as prices stay high," said a Singapore-based trader.
"When prices are high, miners want to get a slice of the pie not just in South Africa, but in Chile and elsewhere, which could be a theme in the next few months as long as prices stay high," said a Singapore-based trader.
"If we see another sustained rally, scrap supply may dry up. If mine supply decreases, things will start to look interesting."
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