Gold gains after 3-day drop on Asian buying, weaker dollar

Gold gains after 3-day drop on Asian buying, weaker dollar

Singapore: Gold rose on Wednesday as Asian buyers snapped up bullion after a three-day losing streak, taking the cue from a weaker dollar, with the ongoing euro zone debt crisis also supporting sentiment.

The dollar slipped 0.3% against a basket of currencies while the euro ticked higher but remained on shaky ground on worries about sovereign debt crisis in the euro zone, after top European financial officials acknowledged that Greece may have to restructure its debt.

“The slightly weaker dollar and some bargain hunting are helping gold’s rebound," said a Hong Kong-based dealer.

“But the market does not have a clear sense of direction and a lot of people are just waiting."

The premium on gold bars in Hong Kong increased 10 cents this week to between $1.30 and $1.80 per ounce over London spot prices as buying picked up, he said. Scrap selling was still muted, he added.

Spot gold gained 0.4% to $1,490.99 an ounce by 9:55am, US gold rose 0.8% to $1,491.10.

The technical outlook for bullion remains bearish for the short term. Spot gold is expected to continue its fall towards $1,456 an ounce, said Reuters market analyst Wang Tao.

“Gold can face more downside pressure technically, if prices break below the 50-day moving average at about $1,470," said Ong Yi Ling, an analyst at Phillip Futures.

The long-term outlook for bullion still looks bright, and expectations that Greece will restructure its debt may drive some investors to seek safe haven in gold, she said.

Spot silver rose 1.3% to $34.36 an ounce. US silver climbed more than 2% to $34.37.

Spot silver hit an all-time high at $49.51 in late April, buoyed by strong investment demand. But prices have fallen more than 30% since as successive margin hikes in COMEX silver futures which nearly doubled trading costs drove investors away.

Holdings in the iShares Silver Trust , the world’s largest silver-backed exchange-traded fund, dropped 8% from its peak in late April to 10,487.38 tonnes by 17 May.

“Given that the key driver of prices remains investment demand, they are likely to remain volatile until they find support from physical demand, which we expect to materialise around the low-$30s," Barclays Capital said in a research note.

Spot platinum edged up 0.4% to $1,768.74, recovering from a low of $1,744.20 hit on Tuesday, its weakest since end of March. Spot palladium was flat at $719.72.

Palladium, by far the worst performing precious metal with a 10% year-to-day decline, is likely to stage a better run than platinum this year on booming automotive industry in emerging economies such as China and India and concerns on ebbing supply, analysts said in a Reuters poll.