LONDON -- Gold bounced back in late trade
on Wednesday after falling to a three-month low as the dollar
pared gains following a retreat in U.S. Treasury yields.
Gold was also helped by short-covering. It rose as high as
$652.25 an ounce after falling to $642.90, its weakest since
mid-March. Gold was quoted at $651.15/651.65 at 1505 GMT,
compared with $648.30/649.80 in New York late on Tuesday.
Traders watched moves in the dollar, which hit an 11-week
peak versus the euro earlier in the day after a rally in U.S.
Treasury yields boosted its appeal, but pared gains following a
drop in those yields after data showing May U.S. retail sales
growth was the highest since January 2006.
"The numbers came out, which were actually positive for the
dollar and negative for gold, but the market hasn't reacted to
them," said David Holmes, director of precious metals sales at
Dresdner Kleinwort.
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"In fact we have seen some pretty decent-sized bids coming
into the market. A little bit of short covering is going on
here. Still that doesn't mean to say that the downside risk is
removed. We still see some long liquidations."
Analysts said gold would remain under pressure so long as
fears of global monetary tightening prevailed.
Bullion traditionally is a hedge against inflation, but it
can become less attractive to investors in times of rising
interest rates as it is zero-yielding.
Rising U.S. interest rates boost the dollar, which also hits
gold as it becomes more expensive for holders of other
currencies.
"As higher interest rates globally suppress inflationary
impulses and make emerging-market assets less attractive, gold
is likely to remain on the defensive," James Steel, metals
analyst at HSBC, said in a daily note.
Gold traders eyed a key technical price level — the 200-day
moving average just above $638 — as a fall below that might
trigger more selling.
"From a longer-term perspective, we would emphasize that the
market has not sustained a break below its 55-day moving average
since 2003. This is located at $635 and as a consequence we
maintain our longer term bullish bias while above here," Karen
Jones, analyst at Commerzbank, said in her weekly price report.
In the physical market, a senior official in top gold
consumer India said the nation's rising gold imports pointed to
a good year after high and volatile prices dampened volumes last
year.
When gold prices first began to decline last week, traders
noted good interest from physical buyers.
The New York gold exchange traded fund (ETF) also saw
inflows after falling 7 tonnes earlier in the week, to total 473
tonnes, although that is still some way off its peak holdings of
just over 500 tonnes in mid-April.
Silver declined with gold, scoring a one-month low at
$12.70. Prices then rose back to $13.10/13.14, against New
York's previous $13.06/13.09.
Spot platinum fell to $1,280/1,284 an ounce from New York's
$1,288/$1,292, while palladium rose $1 to $366/370 an ounce.
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