Gold prices firmed in Europe on Thursday as the dollar hit a two-week low against a basket of currencies, with rising stock markets and sharper appetite for risk encouraging buying of higher-yielding currencies.
The metal has recouped some of the ground lost in the last two days after Federal Reserve chief Ben Bernanke disappointed traders who had expected clearer signals on the prospect of further monetary stimulus in his testimony before Congress.
Measures such as quantitative easing would maintain pressure on long-term interest rates, keeping the opportunity cost of holding gold at rock bottom, while pressuring the dollar.
“It seems that every time we do not have QE3 announced, gold slips back as some of these more speculative positions are liquidated,” Mitsui Precious Metals analyst David Jollie said.
“After that disappointed selling, I think the market returns to more normal behaviour and some of these speculators will try to rebuild positions. Others such as the official sector are also likely buyers on price declines.”
Spot gold was up 0.7 percent at $1,582.76 an ounce at 11:55 SA time, while US gold futures for August delivery were up $11.30 an ounce at $1,582.10.
Interest was boosted by a retreat in the dollar index to two-week lows, although the euro also came under pressure after Spanish borrowing costs rose at a bond auction. Gold tends to benefit from dollar weakness, which makes assets priced in the US unit cheaper for other currency holders.
European stocks trimmed gains after the auction, which fuelled concerns over Europe's debt crisis, but they remained elevated after a spate of upbeat earnings reports.
Firmer appetite for risk also lifted other commodities, such as copper and crude oil, while safe-haven German Bund futures stayed under pressure, down 0.1 percent.
All eyes are on US data later for fresh direction.
“Today, the market will turn its attention to US June lead indicators and existing home sales, as well as weekly jobless claims,” VTB Capital said in a note. “The market will remain rangebound in the meantime with little chance for a sustained rebound, in our opinion.”
ASIAN BUYERS LACK INTEREST
Selling in Asia's physical gold market could pick up as prices advance towards $1,580 an ounce, but trading is likely to remain dull as long as there is no clear direction for prices during the summer lull.
“People are buying and selling when prices move ten or twenty dollars - they buy at $1,560-$1,570 level and sell to take profit at $1,580,” said a Singapore-based dealer. “As we remain range-bound, people are not going to be very hungry for physical materials.”
From a chart perspective, technical analysts at Barclays Capital identify support for gold at $1,565 an ounce and resistance at $1,610.
Among other precious metals, gold's gains helped lift silver 0.9 percent to $27.37 an ounce. The gold/silver ratio, which measures the number of silver ounces needed to buy an ounce of gold, held near its highest in nine months.
Spot platinum was up 0.8 percent at $1,411.49 an ounce, while spot palladium was up 1.3 percent at $578.75 an ounce.
Switzerland, a major refining and trading hub for platinum group metals, remained a net exporter of raw platinum for a third month in June, although imports more than doubled and exports dropped by 30 percent, Swiss customs data showed.
Russia made no palladium exports to Switzerland for a third straight month in June, the data showed. Supply of metal from Russian state stockpiles has added substantially to the market balance in the last decade, but analysts say they expect these sales to peter out.
On the mining front, shares in the world's top miner Anglo American Platinum fell in opening trade on Thursday after the company said its interim earnings would drop as much as 78 percent due to lower sales and prices. - Reuters