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Gold Poised to Gain as U.S. Output Data Boosts Easing Prospects

Gold may gain as manufacturing in the U.S. trailed estimates, boosting prospects of further stimulus by the Federal Reserve to spur growth and increasing demand for bullion as a haven.

Spot gold was at $1,599.03 an ounce by 10:37 a.m. in Singapore, after ending little changed at $1,597.10 yesterday. August-delivery bullion was little changed at $1,599.20 an ounce on the Comex in New York, after dropping 0.4 percent yesterday.

Manufacturing in the U.S. shrank in June to 49.7, worse than the most-pessimistic forecast in a Bloomberg News survey, from 53.5 in May, data yesterday showed, helping the dollar rebound from its biggest drop in eight months against a six- currency basket including the euro. The common currency fell today as euro-area unemployment reached the highest on record in May, raising concern the debt crisis is worsening.

“Gold lacks direction, but sees a stronger quarter ahead as spotlight returns to the U.S. economy,” Lynette Tan, an investment analyst at Phillip Futures Ltd., wrote in an e-mail today. “Gold prices have been sensitive to signs of economic weakness, which tend to increase the likelihood of monetary easing by the Federal Reserve.”

Cash gold last week capped its worst quarter since the three months to September 2008, as the Dollar Index rallied 3.3 percent, after the Fed didn’t buy more debt and instead extended a program of replacing short-term bonds with longer-term debt.

Spot silver was little changed at $27.5275 an ounce, after swinging between gains and losses. Cash platinum dropped as much as 0.6 percent to $1,446.50 an ounce, and was last at $1,452.50. Palladium fell for a second day, declining as much as 0.6 percent to $574.75 an ounce, before trading at $575.75.

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Dollar under pressure as sharemarkets fall

The Australian dollar is more than a third of a US cent lower and has extended losses against other major currencies after global stock markets dropped overnight.

In early trade, the Australian dollar was buying $US1.0388, down from $US1.0435 cents yesterday afternoon.

Market participants said the dollar, the worst performing major currency on Wednesday, was also stung by speculation that the Reserve Bank may cut interest rates from 4.25 pe rcent next week.

RBA officials have sounded content with rates in recent weeks and interbank futures imply only a 40 per cent chance of an easing to 4.0 per cent at the April 3 meeting.

The currency also suffered against the yen, which rallied across the board on speculation that Japanese investors were buying yen to repatriate funds ahead of the country’s financial year end.

The Aussie was recently trading at 86.05 yen, and also buying 77.96 euro cents, slipping below 78 euro cents for the first time since late December.

St George chief economist Hans Kunnen said the currency’s fall today mirrored the performance of resource stocks as pessimism spread through global markets.

Miners Fortescue, BHP Billiton and Rio Tinto were all trading lower at noon, helping to drag the ASX200 into negative territory at noon.

‘‘There is clearly some uncertainty about global economic growth that is being fed through to the stock market through resources and to the currency as well,’’ he said.

Stock markets in Europe and New York fell overnight and the negative sentiment spilled over into Asian markets,  with Japan’s Nikkei down 0.6 per cent at noon.

However, Mr Kunnen said, the Australian dollar could turn around later today as investors took advantage of its relatively low level.

‘‘I think, given the pace of the decline this morning, it may have a firmer afternoon if people re-assess their views that the world is not stopping to spin.’’

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