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Gold recovers, bargain hunting supports

Singapore, December 27, 2010

Spot gold regained some ground and platinum group metals returned to positive  territory, as bargain hunting lent support, after prices lost  about one per cent in early trade in response to China's  interest rate increase on Saturday.

Spot gold fell to a one-week low of $1,371.1  before recovering to $1,379.35 an ounce by 0148 GMT, down 0.4  per cent from the previous close.

US gold futures pulled back from a 0.4-per cent decline to $1,379.9, little changed from the previous clos.

"Earlier speculators were selling on China's rate hike  news, but a lot of buying has since emerged as speculators are  buying on dip," said a Tokyo-based dealer.

Spot gold is technically neutral as it is rangebound between $1,360 and $1,392 per ounce, but the bias seems to be  with the bulls, Reuters market analyst Wang Tao said.

Spot silver fell as much as 1.6 per cent to a  one-week low of $28.75 an ounce, and recovered to $29.04 an  ounce.

Spot platinum gained 0.4 per cent to $1,728.49 an  ounce, and palladium rose by 0.7 per cent to $758.47,  both reversing early losses.

China's central bank raised interest rates on Saturday for  the second time in just over two months as it stepped up its  battle to rein in stubbornly high inflation.

"Some speculators liquidated their positions earlier, but  we also see very good physical demand in the market today,"  said Peter Fung, head of dealing department at Wing Fung  Precious    Metals in Hong Kong.

Fung expected the rate hike to pressure gold prices in the  short term, but physical buying is expected to emerge once  prices dip below $1,370.

"Gold is likely to be traded in the range of $1,360 to  $1,390. In the medium-term, gold is still looking up," Fung said.

Thin trade at the year-end tends to exaggerate price moves, traders also said. The dollar edged up against a basket of currencies on Monday. – Reuters




Tags: Gold | price | Platinum | Silver | Spot gold |

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