RTRS: Gold steady on resolution hopes for euro zone
(Reuters) - Gold was steady on Thursday, following a surge in the previous session to its highest this year as a kneejerk reaction to growing concerns about European sovereign debt gave way to hope a resolution may soon be reached.
"There was relief that there wasn't any more bad news last night. The feeling in markets now is that the events of the past couple of days have stung the authorities into action, and a positive resolution of the euro debt issues is more likely," said Ben Westmore, commodities economist at National Australia Bank.
"I am pretty much flat on prices from here, with a rise in the second half, as consumption in China and India picks up and the dollar declines from current levels."
Spot gold was quoted at $1,165.35 by 12:48 a.m. ET versus a notional close of $1,164.45 on Wednesday. Intraday trading on Wednesday saw bullion climb to $1,174.18, the highest since December 4, 2009.
Investors plowed into exchange-traded gold funds after Greek contagion fears were fueled by Standard & Poor's downgrade of Spain following downgrades for Greece and Portugal before calming on an upbeat U.S. economic outlook.
The world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, said holdings hit a record 1,152.913 tonnes as of April 28, up 6.088 tonnes from the previous business day. It was the third record this week.
"We've been seeing large flows into gold because of concerns of sovereign risk and downgrades occurring in Europe and that is likely to continue," said David Moore, a gold analyst for Commonwealth Bank of Australia.
"It doesn't surprise me the ETFs are up. People are looking to avoid risk."
Gold is sometimes called a currency of fear because of its appeal to investors in times economic turmoil, stemming from a negative to low correlation with other major asset classes.
S&P lowered Spain's long-term rating by one notch to AA, still investment grade and just two notches under AAA. The move follows steeper cuts on Portugal and Greece on Tuesday.
The euro was flat on Thursday, having rallied from one-year lows on Wednesday after the U.S. Federal Reserve's policy statement boosted appetite for risk.
The U.S. Federal Reserve offered a more positive view of the U.S. economy even as it left interest rates on hold near zero and promised to keep them low for an extended period.
"The mess in Europe and tentative signs of recovery coming from the U.S. are what we're watching," a bullion dealer in Sydney said.
U.S. gold futures for June delivery on the COMEX division of the NYMEX were down almost half a percent at $1,166.60 an ounce.
On technical charts, gold is moving in a channel between $1,190 per ounce on the topside and $1,160 on the bottom. A fall below $1,160 could drive gold to $1,145.
Platinum rose to $1,713 an ounce, climbing from a one-week low of $1,695 an ounce on Wednesday.
