ENM: Gold rebounds with oil, crops; still near one-year low
NEW YORK: Gold rose on Wednesday, rebounding from the previous day's 1.4 per cent drop with lift from rising grains and energy prices, but the precious metal remained near its one-year low, and analysts said more losses could be in store.
Soaring grain prices amid a severe drought in the US Midwest and rising crude oil spurred inflation worries, which traditionally boost gold's appeal as a hedge. Trading was quiet ahead of the release of the minutes of US Federal Reserve's latest policy meeting in June.
The metal had dropped 3 per cent in the last four sessions on signs of global economic slowdown and frustrations over a lack of more monetary easing by the US central bank.
Gold is just $40 above its one-year lows near $1,530-1,540 an ounce, and analysts said a failure to hold that support level could lead to a steep price correction.
"The long-term, upward-sloping trend line in gold's favor is in jeopardy of being broken," said Dennis Gartman, a veteran trader and publisher of the daily Gartman Letter.
"Indeed, it has made a progression of lower lows and a steady progression of lower highs, and gold's 200-day moving average is itself trending downward and has been since mid-May," Gartman said.
Spot gold was up 0.5 per cent on the day at $1,575.26 an ounce by 11:42 a.m. EDT (1542 GMT).
US COMEX August gold futures were down $4.30 at $1,575.50 an ounce, narrowing the difference between the futures price and spot gold.
INVESTMENT, PHYSICAL DEMAND LAGS
By Tuesday's close, holdings of gold in the world's largest exchange-traded products (ETPs) fell to the lowest level since mid-June, down nearly a quarter of a million ounces in two trading days, the largest two-day drop since May.
The bulk of the outflows are coming from the SPDR Gold Trust , the world's largest gold ETP, which has shed 333,500 ounces in the last three weeks.
Consumer demand for gold has also been subdued. In India, where the government in the world's largest bullion buyer has raised import duties and taxes on the metal, any weakness in the rupee against the dollar suppresses purchases.
Silver rose by 0.9 per cent on the day to $27.06 an ounce.
The silver price is trading close to its lowest levels this year, having echoed the persistent weakness in gold to fall by nearly a third in value since the end of February.
Among platinum group metals, platinum eased 0.1 per cent on the day to $1,415.75 an ounce, while palladium rose 0.8 per cent to $575.50.
