Gold prices fell the most in four months

Gold prices fell the most in four months, last Friday, as investors, concerned that surging inflation would perhaps prompt Chinato raise interest rates over the weekend, headed for the exit. While concerns still persist that China may look to tighten monetary policy, there was no action by the Chinese monetary authorities over the weekend. As such, those fears have subsided, helping gold to remain steady in early trade.

Nevertheless, Asian demand remains weak, with even some sporadic selling emerging. Rumours that the Chinese government will take action to stem inflationary pressures and limit speculation will likely keep investors on edge and mostly on the sidelines for now. The draw of gold as a safe-haven also appears to have diminished, in spite of the on-going troubles faced by Ireland and the Southern European nation. Consequently, we expect prices to remain range-bound, albeit with one-eye on fluctuations in the dollar.

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