Gold traded lower on Wednesday, under pressure from a stronger dollar, but weak US manufacturing data enabled the euro to claw back some lost ground, pulling bullion up from earlier losses as well. When gold began to bounce up off session lows, a bout of short-covering boosted it further. Gold retraced more losses as the euro got a boost from a Dow Jones report about mounting opposition among Greek lawmakers to a referendum called by Prime Minister George Papandreou. The Greek government reaffirmed that the vote would take place, which knocked the euro back a bit, but gold held its ground. James Steel, a metals analyst and senior vice president at HSBC in New York, said the report about opposition to the referendum "was the turning point. It was more significant than the manufacturing data. The market grabbed onto that news and it helped gold cut losses along with a bit of short covering." Fallout from the collapse of failed broker MF Global Holdings Ltd also rippled through global markets. Late on Monday, Papandreou called an unexpected referendum on the European Union (EU) bailout deal for his debt-ridden country. Rejection of the deal by Greek citizens could lead to a disorderly default. On Tuesday, gold curbed some losses after French President Nicolas Sarkozy and German Chancellor Angela Merkel agreed in a phone conversation that they were committed to last week's EU decisions. Spot gold was quoted at $1719,39 an ounce by 3.33pm EDT, up from a $1713,95 closing bid on Monday, and well up from a session low of $1681,74 an ounce. COMEX benchmark December gold finished down $13,40 per ounce at $1711,80, but pared that decline to $1720,50, a $4,70 per ounce drop, in after-hours New York trade. Germany and France said they were determined to fully implement the decisions taken at last week's EU summit, which further supported the single European currency. "This type of plunging dysthymia pushes everyone back to cash and maybe bonds. It will pass soon enough and today's metal prices will look cheap by as early as next week," said John Howlett, a Division Vice President at Mitsubishi International Corporation's Bullion Daily Report in New York. MF Global failed to protect customer accounts by keeping them separate from the firm's funds, a top US regulator said, as administrators to the collapsed brokerage's UK arm scrambled to close out billions of dollars’ worth of client positions. "At the moment (the) gold price is caught between dollar weakness and the need for liquidity amid heightened uncertainty," said Suki Cooper, a Barclays Capital analyst. The euro trimmed losses against the dollar after the Institute for Supply Management said its index of national US factory activity dipped to 50,8 from 51,6 the month before, below forecasts for an improvement to 52,0. GOLD SUPPORT Investor interest in gold continued to pick up this week, reflected in inflows of metal into exchange-traded funds (ETFs). Holdings of gold in the major ETFs tracked by Reuters have risen by over 800000 ounces this month, marking their first monthly increase since July. Lately gold has moved in tighter lock-step with industrial commodities such as copper - or riskier assets such as equities - in the last month, and has thus been more prone to falling in times of heightened uncertainty, rather than adopting its traditional safe-haven role and benefiting from such turmoil. Silver was lower at $33,15 an ounce from $34,23 previously. Platinum cut its declines to $1584,25 an ounce from Monday's closing bid at $1593,15, and palladium was quoted at $632,45, off $641,08 previously. For platinum group metals, Tuesday's data on US car sales was expected to be supportive with incomplete results showing robust, though mixed, October sales. A Reuters poll forecast annualised sales of 13,20-million vehicles sold in October.

Source