Gold price up from two-month low
Gold edged up on Thursday, after falling almost $15 towards $900 an ounce the previous day as investor risk aversion pushed the dollar up versus the euro, dulling bullion’s allure as an alternative asset.
The bounce from a two-month low hit on Wednesday was mainly led by bargain-hunting by regional dealers, while physical demand remained low at current high levels, traders said.
Spot gold traded at $911.80 an ounce at 0337 GMT, up 0.4 percent from New York’s notional close of $908.45.
U.S. gold futures for August delivery rose 0.3 percent to $911.70 an ounce after falling $19.80, or 2.1 percent, to $909.30 on the COMEX division of the New York Mercantile Exchange on Wednesday.
“There’s bargain-hunter buying in Asia after seeing gold falling to a six-week low. In the short-term, I expect gold to hold a level between $905 and $914,” said Louis Lok, a dealer at Ban of China in Hong Kong.
Bullion has lost some of its attraction recently due to lessened inflation concerns after a fall in oil prices and as flight-to-quality buying in the face of economic uncertainty was directed into U.S. Treasury bonds and the dollar.
On Wednesday, gold fell as low as $904.70, its lowest since May 8. Liquidation of long positions by fund managers had accelerated the decline after gold broke below technical support at $915, Lok said.
“All the commodities markets faced selling pressure, and money came out from there into the dollar again,” Lok said.
But the dollar pared recent gains on Thursday, with the euro rising 0.2 percent versus the U.S. currency.
It was still not far from a two-week high versus the euro hit the previous day when mounting doubts about the health of the global economy spurred risk aversion.
Looking ahead, traders said gold may test the downside again when a technical bounce is over.
“Gold will likely stay under pressure unless investor confidence comes back over the financial sector and a recovery in the global economy is more in sight, resulting in a rally in equities,” said a fund manager at a Tokyo-based company.
“I expect gold to test how resilient (support) is and whether physical demand emerges this summer,” the fund manager said, referring to a key support level of $870-$880.
Bank of China’s Lok had a similar view.
“There is a very very important support level at $878 to $885. In case the market cannot hold above this level, I don’t think it can be lifted above $920 again,” Lok said.
Reflecting receding demand for bullion, the holdings of the world’s largest gold-backed exchange-traded fund, the SPDR Gold Trust, fell 0.9 percent on Wednesday.
The holdings stood at 1,109.81 tonnes as of July 8, down 10.38 tonnes from the previous business day and down 24.22 tonnes from a record hit on June 1.