Gold holds weekly loss as US inflation counters China stimulus

Gold held a weekly loss as concerns that US inflation may boost the case for higher rates countered expectations of an increase in demand as Greek debt talks remained deadlocked and China stepped up stimulus.

Bullion for immediate delivery traded at US$1,204.55 an ounce by 9:59 am in Singapore from US$1,204.22 on Friday when it completed a 0.3 per cent weekly decline, according to Bloomberg generic pricing. Gold in Shanghai extended a weekly advance.

The cost of living in the US excluding food and fuel rose 0.2 per cent for a third month in March, data showed Friday. China announced on Sunday the biggest cut to the amount lenders must set aside as reserves since the global financial crisis. Greece said it won't renege on election pledges to end austerity measures even as creditors pressed for a compromise to free financing and avert a worsening crisis.

"There's a little bit of geopolitical uncertainty," said David Lennox, an analyst at Fat Prophets in Sydney. "Until we get through it, find out how it's all going to be handled and get out the other end, it's just going to add uncertainty."

A Labor Department report showed core inflation rose in March as Federal Reserve officials debate the timing of boosting interest rates. Higher rates damp the lure of gold, which generally offers returns only through price gains.

The reserve-requirement ratio will be lowered 1 percentage point effective April 20, the People's Bank of China said on its website Sunday, the second reduction this year and the largest since November 2008.

US President Barack Obama and European Central Bank President Mario Draghi called on the Greek government to do more to resolve the standoff amid depleting cash reserves. Greek officials, including Deputy Prime Minister Yannis Dragasakis, stood their ground on measures such as cutting wages and pensions, adding new taxes or selling state assets.

Gold for June delivery advanced 0.1 per cent to US$1,203.90 an ounce on the Comex. Bullion of 99.99 per cent purity climbed 0.2 per cent to 240.40 yuan a gram (US$1,206.29 an ounce) on the Shanghai Gold Exchange after a 0.5 per cent increase in the five days ended April 17, the first gain in three weeks.

Silver for immediate delivery was little changed at US$16.2755 an ounce. Platinum fell 0.1 per cent to US$1,170.13 an ounce, while palladium lost 0.1 per cent to US$785.45 an ounce.

BLOOMBERG