Gold steady

Gold spent another week consolidating within a range of 1700 and 1750. Renewed tensions in the Eurozone amid the delay of the Greek bailout plan failed to drive demand for gold as safe-haven asset. Meanwhile, the US dollar strengthened due to better-than-expected US economic data and FOMC minutes. The market appeared to have priced in a lower chance of QE3 after the Fed changed workings in the minutes for the January meeting. This has also reduced the appetite for the yellow metal.
Global macroeconomic uncertainty continues to support gold prices in the medium-term. Although recent data released in the US has improved, unemployment rate remains elevated and the US government is expected to implement stringent fiscal consolidation this year. The push back of the first rate hike in January signaled policymakers' concerns over economic growth. In short, prolonged low interest rates should benefit gold.
Also positive for the yellow metal is net buying from the official sector. European central banks are substantial holders of gold. For instance, Italy, the world's third-largest national holder of gold, holds 2451.8 metric tons, making up 71% of its total reserves. There have been speculations debt-ridden European economies may dispose of their gold holdings to repay their debts, this may not be in the government's agenda indeed. The use of gold proceed to repay debts will weaken balance sheets by switching out a hard asset. Moreover, notwithstanding the substantial gold holdings, they represent only a small percentage of debts in many European countries. For example, Italy's total gold holdings, upon sales, would yield around $130 B representing just 6% of Italy's debt. For Greece it total gold holdings of 111.6 metric tons would yield a dollar value of $6B, or around 1% of its debt.