Gold held steady on Tuesday, after Standard and Poor’s downgrade of Italy’s credit rating heightened worries about the euro zone debt crisis ahead of a key US Federal Reserve policy meeting.
In the latest blow to the euro zone, ratings agency Standard
& Poor’s cut Italy’s sovereign credit rating by one notch, saying its economic growth prospects were getting weaker and planned reforms by the government would not help much.
The euro fell sharply to near a seven-month low against the dollar while the greenback solidified a one-percent gain from the previous session, putting pressure on dollar-denominated commodities.
"We are seeing small buying interest," said Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong. "Most people are waiting for the Fed meeting which is expected to show a clear direction."
Investors are eager to learn if the US central bank will embark on more stimulus measures to spur economic growth, as policy makers meet on Tuesday and Wednesday. Another round of quantitative easing would likely buoy gold, as the prospect of cheap cash increases inflation outlook.
Spot gold was little changed at $1 779,39 an ounce by 0320 GMT, reversing a 1,8-percent loss in the previous session.
U.S. gold (GCcv1) gained 0,2% to $1 783.
Technical analysis suggested gold is likely to range between
$1 761,94 and $1 805 in the day, said Reuters market analyst Wang Tao.
Spot gold has lost more than 2% so far this month and 7% from the record high of above $1 920 hit on Sept. 6, but it is still up more than a quarter from the end of 2010.
The prices around $1 700 to $1 750 are seen as a strong support for gold prices, traders and analysts said.
"It is not easy for gold to break below $1 700," said a dealer at a large Tokyo-based bullion house, "People are still watching for good prices for bargain hunting, because it is very difficult to find alternative assets to buy."
Gold demand in China, the world’s largest gold producer and second-biggest consumer, could rise 10% this year as consumers choose the metal as a form of wealth protection, the World Gold Council said on Monday.
Spot silver lost 0,6% to $39,45, but off the three-week low of $38,95 hit in the previous session.
