LONDON, Nov 2: Gold prices recovered slightly in European trade on Wednesday from heavy losses the previous day, with dealers keeping a close eye on the dollar for some direction.
The precious metal fell to its lowest level in five weeks to $457.50 a troy ounce on Tuesday, pressured by speculative selling and a strong US currency.
Spot gold moved up to $461.75 an ounce on Wednesday, but fell to $460.90/461.70 up from $459.50/460.25 last quoted in New York.
The level around $458 is quite important and if that holds, then we could go back up a bit. But if it breaks, then I think there could be further liquidations from the funds, Stephen Briggs, economist at SG Corporate and Investment Banking, said.
I don’t think it’s decisive at the moment, Briggs said, referring to gold’s possible movement in either direction.
Dealers said the market could take a lead from the dollar, which hit a two-year high against the yen on Wednesday after the Federal Reserve increased US interest rates for the 12th straight time on Tuesday.
The Fed hinted it would continue with measured rate rises — a move which could further boost the dollar and makes dollar-priced gold less attractive to investors.
Gold’s sell-off has been largely technically-driven and remains a very pivotal moment for gold, said Yingxi Yu, metals analyst at Barclays Capital.
I think price action is likely to remain quite volatile over the near term, she said, adding physical buying could give some support to the market.
In Southeast Asia, dealers noted some buying at around $460 from jewellers in Thailand, while Hong Kong dealers saw short covering as well as physical intake from local jewellers and Japanese investors.
Any further drop in prices could lift physical demand in India, the world’s largest consumer, as jewellers could stock the metal after the end of the peak festival sales this week, dealers said.
In other precious metals, silver fell to $7.40/7.43 from $7.43/7.46 in the US market on Tuesday.
Platinum was quoted at $924/927 an ounce, compared with $923/927 in New York, while palladium was flat at $219/222.—Reuters