RTRS: Gold eases as risk aversion cools and equities firm
Gold declined on Wednesday after reassuring comments from Federal Reserve Chairman Ben Bernanke on the economy cooled risk aversion.
A recovery in equities indicates a pick-up in appetite for risk and may divert investment from gold, analysts said.
Spot gold slipped to $958.80/960.80 an ounce at 7:11 a.m. EST from $862.45 late in New York on Tuesday.
"The gold price is a fear indicator," said Commerzbank analyst Eugen Weinberg. "As the chance of us seeing problems on the (equity) markets is lower than it was yesterday, some risk aversion has been taken out of the market."
Holdings of the world's largest gold exchange-traded fund, the SPDR Gold Trust, stood at 1,028.98 tonnes for a fourth consecutive session on Tuesday, fuelling fears burgeoning demand for gold to back ETFs may have stalled.
"There is no demand for gold other than investment demand into ETFs and into small bars and coins," said Weinberg.
Bernanke said on Tuesday major banks should weather the recession without being nationalized. His comments that he believed the Fed could head off rising inflation was also seen as negative for gold.
"If, as Chairman Bernanke believes, consumer price growth is likely to remain tepid for the next several years, then low prices are likely to present a major headwind to further gold advances," said HSBC analyst James Steel.
European shares tracked gains in Asia and the United States, snapping a three-day losing streak, as fears over potential banks nationalizations eased.
The dollar firmed against the euro on Wednesday, boosted after the head of Standard and Poor's said he expected more sovereign ratings downgrades than upgrades this year.
Gold typically trends in the opposite direction to the U.S. currency, to which it is often bought as an alternative asset.
However, they have moved in line in recent months as both have benefited from a flight to safety among investors.
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Gold buying in India has picked up as prices have retreated from the record highs they hit last week. A further dip below 15,000 rupees per 10 grams may rekindle buying interest, dealers said.
"We are getting calls for the first time after gold dipped below $1,000," said a dealer with a state-run bank in Mumbai.
