Gold edged up on Wednesday, taking a cue from a stronger euro after Moody's rating agency affirmed Spain's investment grade status, fuelling hopes that Madrid will soon apply for formal aid from its European Union partners.
The euro hit a one-month high and the dollar index dropped to its lowest in nearly two weeks following the Moody's decision. A weaker greenback makes dollar-priced commodities more attractive for buyers holding other currencies.
Spot gold was 0.2 percent higher at $1,750.14 per ounce by 13:20 SA time, holding above a one-month low hit on Monday. US gold futures were off 0.1 percent at $1,749.10.
Analysts said that gold was roughly tracking foreign currency movements, but trading was thin as investors waited for fresh direction on Europe, where a summit of European Union leaders begins on Thursday.
“Gold has moved in tandem to a certain degree with the euro and other commodities and rallied overnight on a weaker dollar, but it has run out of steam,” said David Govett, head of precious metals at Marex Spectron.
“Most people are sitting back and waiting for tomorrow's European Union summit to go ahead to see if anything comes out of that. If there was a sudden announcement and Spain asked for help then it will be good for the euro, the dollar would come off and it would be good for gold.”
Moody's Investors Service kept Spain's credit rating at Baa3 late on Tuesday, assuaging fears that the troubled economy would be cut to junk status and sending yields on Spanish government debt lower.
Investors will be also be watching for more economic numbers due later this week, including US housing market data as well as China's third-quarter gross domestic product figure. Weak data would be considered likely to point to stimulative policies that could be supportive for gold.
The precious metal has been broadly rangebound after a recent rally that took it to 11-month highs faded before prices could breach the psychologically important $1,800 level.
Analysts said that failure to had triggered a short-term correction in prices.
“The overall attitude towards the yellow metal remains positive looking out over the months ahead, but hesitancy to express that view in the near term is becoming an obstacle. It feels like gold needs a healthy clean-out at this juncture,” UBS analyst Edel Tully said in a note to clients.
“A further correction from here would ultimately be beneficial though, given the sharp run-up in prices since mid-October, the repeated failure to breach $1,800 and the degree of speculative length,” Tully added.
ETF HOLDINGS RISE
Holdings in bullion-backed exchange-traded funds inched up by almost 16,700 ounces on Tuesday, as a 28,000 ounce inflow to New York's Comex Gold Trust more than offset an 11,500 ounce outflow from ETF Securities' holdings.
Meanwhile, silver ETF holdings slipped by 1.3 million ounces, following flows out from the iShares Silver Trust and ETF Securities.
In South Africa, where industrial unrest has gripped the country's mining sector, bullion producer Gold Fields said on Wednesday that an illegal strike at some of its facilities had ended.
It said 6,200 employees returned to work at its Beatrix site, which is expected to produce 360,000 ounces of gold this year.
Among other metals, spot platinum climbed 0.7 percent to $1,649.99 per ounce, while palladium rose 1.1 percent to $641.50.
Silver was 0.2 percent higher at $33.01 per ounce. - Reuters