By Simon Kennedy, MarketWatch
LONDON (MarketWatch) — Gold and silver prices strengthened Thursday, recovering from an earlier drop in Asian trading hours as the dollar weakened and as German law makers convened to vote on an expansion of the European rescue fund.
Gold for December delivery GC1Z -0.01% rose $12.60, or 0.8%, to $1,630.70 in electronic trading, having earlier briefly slipped back below $1,600. The December silver contract SI1Z +0.87% rose 97 cents, or 3.2%, to $31.11 an ounce.
The moves came as the dollar lost ground against other major currencies, including a 1.1% gain for the euro to $1.367, as law makers in Germany met for a crucial vote on plans to expand the European Financial Stability Facility — the euro-zone rescue fund.
Also Thursday, an inspection team from the European Commission, European Central Bank and International Monetary Fund will return to Athens as part of the assessment of whether Greece will receive the next round of international aid.
Analysts at Deutsche Bank said Thursday that, in terms of precious metals, they continue to believe gold will be the main beneficiary of the current unstable macroeconomic environment.
“However, some concerns have been raised that the recent correction in precious metal prices during a period of heightened risk aversion is a worrying sign,” the broker said.
In particular, Deutsche Bank noted that fading demand for physically-backed gold exchange-traded funds is a possible sign “that investor appetite for gold may be reaching saturation point.”
From a technical analysis viewpoint, KASB Securities analyst Aiyaz Hassan said gold’s so-called stochastic oscillator — an indicator of momentum in prices — has generated a buy signal for the precious metal.
He added in a note to clients that the relative strength index for the metal is also “about to become oversold as well."
Simon Kennedy is the City correspondent for MarketWatch in London.
