Gold battled to stretch yesterday`s rally but momentum seems to be running out of steam, as the metal steadied above $1,600 an ounce on Thursday. The appeal for bullions is still boosted by growing belief that central banks will soon adopt more measures to recover the ailing world economy.
As of 03:04 ET, Spot Gold was nearly flat around $1,605.70 an ounce, recording an intraday high of $1,608.06 from a low of $1,601.34.
Gold prices were pushed above the $1,600 level on Wednesday, after the Wall Street Journal reported that growing number of Fed officials have keened that the central bank needed to expand its stimulus program.
"Many officials appear increasingly inclined to move unless they see evidence soon that activity is picking up on its own." Wall Street reported on Wednesday. "Fed officials could take some actions in combination or one after another.
Prices hit its highest level in almost three weeks as the dollar slumped against the euro following the report, given that further monetary easing and lower borrowing costs will inevitably weaken the greenback.
Gold was also supported by improved risk appetite that followed the comment by ECB governing council member Ewald Nowotny, who suggested the odds of enhancing the region`s rescue fund.
Metals in general are still hammered by a firmer U.S. dollar, but gold was able to reverse course today as euro rebounded unexpectedly from almost a two-year low against the U.S. dollar.
Gold in particular has been on the search to restore its so-called "safe-haven" status, but the dollar remains too much weight.
Moving to others metals, Spot Silver was up 0.20 percent at $27.40 an ounce. Platinum was up 0.33 percent at $1,404.50 an ounce, while Spot Palladium was up 0.43 percent at $567.47 an ounce.
Bullions stood on a solid brick this morning after Egan Jones, the independent rating agency, downgraded Italy`s sovereign bond to Junk with negative outlook, citing the spiraling Italian borrowing costs, boosting the appeal for the metal as a safe haven.
The appeal for safety seems to be growing for precious gold as the world economy slows considerably and demand on commodities accordingly wanes keeping inflation low and cash preferred havens till now favored.
Given the lack of evident that central banks will rush to tackle the European debt crisis and support the fatigue global recovery, the momentum that drove the metal to a three-week high will likely weaken unless new evident emerges.
Overall, uncertainty about Europe`s worsening debt crisis is still dominating the metals market and that should give the yellow metal further shine every once in a while until it gathers the right momentum to break out of the rout and return the ultimate haven.
