Gold held close to the previous session's near three-week high on Wednesday, supported by an increased focus on inflation after China's second interest rate hike in six weeks and residual interest in the metal as a haven.
|||Gold held close to the previous session's near three-week high on Wednesday, supported by an increased focus on inflation after China's second interest rate hike in six weeks and residual interest in the metal as a haven.
Spot gold was bid at $1,362.70 an ounce at 15:33 SA time, against $1,363.59 late in New York on Tuesday. U.S. gold futures for April delivery eased 50 cents to $1,363.60 an ounce.
A change in previously lacklustre sentiment towards the precious metal on Tuesday as it held its ground after China's rate hike prompted a scramble among speculative investors to cover short positions, lifting prices more than 1 percent.
A run of well-received economic data in January had taken the wind out of gold's sails and increased speculation a correction was due, pushing prices back towards $1,300 an ounce.
“A lot of speculative (investors) that had gone in at the end of last year clearly saw growth being reignited and they got scared,” said London & Capital portfolio manager Pau Morilla Giner. “They thought that gold would lose its appeal.”
“But the long-term money in gold is still there,” he said. “The realisation is that economic news has been better than expected because the stimulus that has been applied has been extraordinary.”
On the wider markets, the euro gave up its gains against the dollar after sources said Bundesbank head Axel Weber will not be a candidate to replace Jean-Claude Trichet as President of the European Central Bank. European shares edged lower. [FRX/] [.EU]
U.S. oil prices rose after four consecutive sessions of losses, while Brent crude rose more than half a percent to above $100 a barrel due to tighter North Sea supplies. Base metals prices eased.
MARKETS AWAIT BERNANKE
Financial markets' attention will be focused on Federal Reserve Chairman Ben Bernanke's testimony to the House Budget Committee at 17:00 SA time, where traders will look for clues as to the outlook for monetary policy.
“The messaging from Fed speakers so far this week has held close to market expectations,” said UBS in a note. “Today Fed Chairman Bernanke testifies to Congress, and if he retains his dovish undertones of last week this may assist gold.”
Holdings of the world's largest gold-backed exchange-traded fund, the SPDR Gold Trust , dipped to 1,228.56 tonnes on Tuesday from 1,228.864 tonnes the previous day, although the hefty outflows seen in January have apparently been staunched.
The SPDR fund saw its second-biggest monthly outflow and the main silver ETF, the iShares Silver Trust , its biggest ever outflow last month, adding downward momentum to precious metal prices.
Silver was bid at $30.30 an ounce against $30.31, after reaching its highest price since Jan. 4 on Tuesday at $30.35 an ounce.
The gold:silver ratio - the number of silver ounces needed to buy an ounce of gold - recovered from the near five-year low below 45 it reached on Tuesday to just above that level. Platinum and palladium rose back to multi-year highs on Wednesday at $1,865 and $836.75 an ounce respectively, boosted by firmer gold prices, a softer dollar, and expectations that demand from carmakers for the autocatalyst metals will improve.
Analysts also suspect platinum output from South Africa, which produces four-fifths of world supply of the metal, and palladium exports from Russia could be constrained this year.
“Supply side fundamentals and the economic recovery support a slightly brighter future outlook,” said VTB Capital in a note.
Platinum was later at $1,858 an ounce against $1,855.24, while palladium was at $832.97 versus $835.72. - Reuters
Source: http://www.iol.co.za/gold-holds-near-3-week-highs-1.1023871
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