Business | Markets
Gold firms as price dip sparks rally in European demand
Weaker dollar helps shore up metal while Indian traders report good business as nation stocks up ahead of festivals
- Reuters
- Published: 00:00 July 30, 2010
London: Gold firmed in Europe yesterday as some buyers were tempted back to the market by the precious metal's fall to three-month lows, while the weaker dollar also helped support prices.
European investment remained lacklustre as risk appetite sharpened, however, while the world's largest gold-backed exchange traded fund reported a hefty outflow on Wednesday.
Spot gold was bid at $1,165.25 (Dh4,279) an ounce at 11.31am in New York, against $1,162.55 late on Wednesday, recovering from a three-month low of $1,156.90 reached that day. US gold futures for Aug-ust delivery rose $4.50 to $1,164.90.
"The risk of further liquidation in gold in the short term remains given current risk appetite," said Anne-Laure Tremblay, an analyst at BNP Paribas.
"Redemptions in gold ETFs and in net non-commercial futures positions have been illustrating waning interest for the precious metal. At current price levels, however, physical gold demand is supportive," Tremblay said.
Traders reported good buying for a fourth day in major gold consumer India, as they stocked up ahead of festivals in the subcontinent.
Gold hit a record $1,264.90 an ounce last month as investors flocked to the precious metal to protect against sovereign debt problems in countries like Greece and Portugal, but it has since failed to maintain those highs.
Investment demand for physical bullion in Europe has softened as concerns over the stability of the fin-ancial system recede. This is set to keep prices under pressure. "Physical investment in the continental European market is very, very quiet," said Wolfgang Wrzesniok-Rossbach, head of sales at Heraeus. "It is not a mass market at the moment."
Sales volume
He said the company had the highest turnover in gold ever in May, but that sales volumes had dropped off significantly in July.
"There was clearly a Greece effect this year that led from February onwards until May." The world's largest gold ETF, the SPDR Gold Trust, said its holdings fell by 18.55 tonnes on Wednesday, their biggest one-day drop since April 2008.
UBS analyst Edel Tully said while gold had arrested its slide, the physical interest that had emerged to lend support to the market may not be enough to drive prices higher.
"It is clear that the frenzied appetite to liquidate that prevailed earlier in the week has significantly dampened," said UBS analyst Edel Tully in a note.
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