Gold steadies as lower prices attract buyers

London: Gold prices steadied in Europe Wednesday as the metal's slide to a seven-week low in the previous session prompted buying of physical stocks of the precious metal.

But a persistently firmer dollar, which hit its highest since early September versus the euro on Tuesday, limited gains.

Spot gold was bid at $1,082.05 (Dh3,979.77) an ounce at 1206 GMT yesterday, against $1,083.55 late in New York on Tuesday.

Afshin Nabavi, head of trading at MKS Finance, said many speculative investors were getting out of the market as the end of the year approached, with thin trade exaggerating price moves. But 2010 could bring a recovery, he added.

Physical demand

"Selling seems to be coming from specs liquidating their positions, and if it hadn't been for physical demand, the market would have been much, much lower," he said.

"It is very difficult to have an opinion for the next few days, but I remain positive towards the price of gold in the coming year.

"Once everyone is back in their seats, we will see prices head back towards where they were earlier this month."

Spot gold rose to an all-time high of $1,226.10 an ounce at the beginning of December.

The dollar hit a two-month peak on the yen in Asia yesterday and remained firm against the euro due to optimistic US economic data and the steepest yield curve on record.

Strength in the US unit limits gold's appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.

Other commodities also held firm yesterday, with oil prices holding near $75 a barrel after industry data showed a sharp drawdown in US crude stocks and an unexpected fall in gasoline supply.

Gold tends to track crude prices, as the metal can be bought as a hedge against oil-led inflation.

Gold prices are eyeing support around $1,060-$1,065, traders said, having shed 11.5 per cent since early December's record high. If this breaks, it could lead to a further correction, analysts said.

At a glance