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Gold edges up fourth day on risk appetite

London, September 9, 2010

Gold edged up for a fourth day on Thursday, having backed off Wednesday's peaks as equity markets and the euro rose, encouraging investors to delve back into riskier assets.

The more upbeat mood was not apparent across all markets.

German Bund prices rose after a European Central Bank official said economic growth would struggle once monetary stimulus measures had run their course.

With this stark reminder of the risk of slower global growth in mind, analysts said gold looked unlikely to shed its appeal as a safe-haven investment any time soon.

Spot gold was last at $1,255.30 an ounce at 1050 GMT, compared with $1,254.50 late in New York on Wednesday. Prices hit an intraday high of $1,262.25 the day before, just shy of late June's all-time high at $1,264.90.

US gold futures for December delivery were last down $0.5 at $1,257.00 an ounce.

"We are still in a situation where confidence ebbs and flows pretty rapidly from day to day, and sometimes from hour to hour, and morning to afternoon as the data comes in and changes people's opinions," said Credit Suisse analyst Tom Kendall.

"The rally has done a lot, and it is looking a little tired right now, so we wouldn't be surprised to see it consolidate, or come off a bit before trying again," he said, adding gold was likely to trade through $1,300 through the end of this year.

More highs possible

Gold hit its record in June as concern over the impact of the European sovereign debt crisis and the resilience of the US economic recovery came into question, triggering a wave of demand for gold as a form of protection against volatility in the wider financial markets.

The US economy has shown "widespread signs" of slowing over recent weeks, the Federal Reserve said on Wednesday in a report, suggesting that while the recovery has been faltering, the economy may skirt a second recession.

"I think sentiment is still bullish right now," said Dick Poon, manager at Heraeus in Hong Kong. "The market is only consolidating." He said gold was still on track for new highs.

In fundamental news for gold, the South African statistics office said gold output fell 3.4 percent in volume terms, while total mineral production fell 1.0 percent in July.

Gold output has been dwindling in South Africa, which is expected to drop in the rankings to be the world's fifth-largest producer this year, from fourth last year, according to Reuters data.

Local gold dealers in Singapore reported a steady flow of two-way business from Vietnam and Thailand, as well as an uptick in demand from top consumer India on Wednesday.

Consumption in India rises during the festive season, beginning with Raksha Bandhan in August and lasting through November, with Dhanteras on Nov. 3 the single biggest gold-buying day.

In other precious metals, silver was last at $19.94 an ounce, against $19.88 the day before when it hit its highest level since early 2008, as investors sought a cheaper safe-haven alternative to gold.

The gold/silver ratio -- the number of ounces of silver needed to buy one ounce of gold -- was at 63.19, close to its lowest since early April.

In the platinum group metals, traders kept an eye on developments at South African miner Northam Platinum, where union members are currently on strike and say action may continue for months.

Platinum was last quoted at $1,554.00 an ounce, compared with $1,554.00 the day before, while palladium was at $521.50 compared with $522.00. – Reuters




Tags: Central Bank | Gold | London | equity | Platinum | Euros |

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