Gold prices clung onto early gains on Thursday, ending four days of losses after a widely-anticipated auction of Spanish debt supported the euro and appetite for so-called higher-risk assets like stocks and commodities.
Prices remained rangebound, however, as yields ticked higher on the longer dated paper than in a previous auction in January, with the precious metal failing to build on a session high touched in the immediate wake of the sale.
Spot gold was up 0.1 percent at $1,643.70 an ounce at 12:01 SA time, while US gold futures for June delivery were up $4.90 an ounce at $1,644.50.
Spain's Treasury issued 2.5 billion euros ($3.3 billion) in 2- and 10-year bonds on Thursday, at the top end of the targeted amount and on solid demand.
“There was a very good bid-to-cover ratio, (though) the yields indicated are a little higher than the previous auction,” LGT Capital Management analyst Bayram Dincer said. “The euro-dollar reaction post-auction was positive, which also benefited the gold price, and risk-on sentiment improved.”
While the euro failed to build on its earlier session highs, it remained up 0.2 percent against the dollar as markets digested the sale. European shares also stayed in the black, albeit off the highs of the day.
Attention is now turning across the Atlantic, to a Federal Reserve meeting next week, at which policymakers will discuss US monetary policy.
Gold traders are awaiting fresh clues on whether a third round of quantitative easing, which would keep interest rates, and consequently the opportunity cost of holding bullion, at rock-bottom levels, is on the cards.
Minutes from the Fed's March meeting released this month showed support thinning for further bond purchases. Officials are unlikely to develop any more appetite for them by their meeting next week, despite disappointing March jobs figures.
GOLD STICKS TO RANGE
From a chart perspective, gold remains firmly in the $1,630-1,657 range it has held this week, lacking strong external drivers to break out.
Physical buying interest from the world's top two gold consumers, India and China, has been sluggish, even after a three-week strike by India's jewellers came to an end.
A break above the top of its current range could precipitate a rise towards $1,680/$1,690, analysts said, while decent support is seen near its April lows at $1,611 an ounce.
“We remain bearish gold so long as it trades below 1680, the last high,” ScotiaMocatta said in a note late on Wednesday.
Among other precious metals, silver was up 0.2 percent at $31.65 an ounce, while spot platinum was up 0.9 percent at $1,586.74 an ounce and spot palladium was 1 percent higher at $661.20 an ounce.
The gold:platinum ratio, which measures the number of gold ounces needed to buy an ounce of platinum, edged down to 1.04 on Thursday from the one-month high it hit earlier this week, as platinum clawed back some lost ground against the yellow metal.
Platinum, which is heavily exposed to the European car market, has struggled to overcome soft demand in recent years.
“We still favour gold,” Standard Bank said in a monthly report. “We see $1,630 and $1,600 as good levels to establish a long position for a move higher. Physical demand for gold in Asia is strong below $1,650.”
“From a cost-of-production perspective, platinum provides value between $1,600 and $1,550,” it added. “The platinum market has tightened up after the recent strike at an Impala Platinum mine in South Africa. However, we believe that industrial demand will remain absent above $1,750 - and this should cap upside.”
Meanwhile Anglo American Platinum, the world's largest platinum miner, maintained its full-year output target despite a 24 percent drop in first-quarter production. - Reuters