LONDON—The spot price of gold, while up, came off its early highs after China's central bank said it will raise the amount of money commercial banks are required to hold in reserve in a bid to rein in the country's high inflation rate, a key driver of demand for gold as an alternative store of value.
The People's Bank of China said it will lift banks' reserve requirement ratio by a half-percentage point—the sixth such hike this year—as it moves to address inflation concerns by locking up liquidity in the banking system.
Ahead of the New York day, spot gold was up $2.80, or 0.2%, at $1,518,10 a troy ounce but well off its intraday high of just below $1,524.
Uncertainty over the near-term outlook for gold remains, with the market appearing to lack momentum for a further push higher. While physical buying by Asians has picked up in response to recent dips in price, the expectation is that there will be a seasonal slowdown in physical demand out of India and China in the coming weeks.
ETF Securities reported, though, that inflows into its gold exchange-traded commodities had reached an eight-week high last week amid persistent concerns over the state of Greece's finances.
"The increasing likelihood of a 'credit event' for Greece and continued wrangling between the European Central Bank and Germany on how to resolve the crisis prompted investors to build physically backed gold ETC positions totaling $65 million last week, an eight-week high," it said in a report.
Inflows are up $164 million over the past four weeks, it added.
Meanwhile, ETF Securities' physically backed silver ETC inflows hit a 14-week high of $28 million.
Analysts, however, suggest silver, which slumped Monday, may be due a further pullback. It traded off four cents, or 0.1%, at $34.72 an ounce.
In other metals, spot platinum was off $2, or 0.1%, at $1,794 an ounce, and spot palladium was unchanged at $792 an ounce.
Write to Rhiannon Hoyle at rhiannon.hoyle@dowjones.com
