TOKYO - Gold prices inched up to hover around $885 an ounce on Wednesday, supported by physical demand that helped offset waning investor interest in gold as a safe-haven asset.
Still, the market continues to watch for signs of trouble in the financial industry, which could once again enhance gold’s allure among investors.
“I think physical demand has picked up a bit, perhaps from the Indian side,” said Adrian Koh, an analyst at Phillip Futures.
“That’s probably why we saw a bit of a run up on gold prices over the past couple of days,” he said.
Gold was trading at $884.20 an ounce at 0612 GMT, 0.2 percent higher than New York’s notional close of $882.25 on Tuesday.
Gold imports by India, the world’s largest consumer of the precious metal, are set to grow by a quarter in April from a year ago, the first rise since August, the head of metals trading firm MMTC Ltd said on Tuesday.
This is in sharp contrast to February and March, when gold imports dropped to almost zero.
But demand for gold as an investment was seen taking a break.
Global share prices arrested declines after U.S. Treasury Secretary Timothy Geithner said most U.S. banks are well capitalised, helping ease credit jitters that had previously heightened bullion’s appeal.
Financial markets are eagerly awaiting the outcome of U.S. authorities’ stress tests on banks.
The world’s largest gold-backed exchange-traded fund, the SPDR Gold Trust, said holdings remained unchanged at 1,105.98 tonnes as of April 21 after investor outflows early this week reached their biggest since early September.
But the holdings are still in sight of a record 1,127.68 tonnes, first marked on April 9.
“Physical demand for gold remains from India and China, and SPDR, while it shed some 20 tonnes, remains at a historically high level, supported by long-term investors,” said Shuji Sugata, a manager at Mitsubishi Corp Futures & Securities.
He sid that while gold may come under pressure if stock markets perform well, concerns over the health of U.S. banks would continue to lend support.
“I think $850-$860 looks firm,” Sugata said.
The dollar shed 0.4 percent to 98.32 yen after gaining 0.8 percent on Tuesday. It hit a six-month high of 101.45 on April 6 but has gradually fallen since then, making gold cheaper in non-dollar terms.
