Gold steadies around $1,160; demand resurfaces

LONDON: Gold held around $1,160 an ounce in Europe on Wednesday, steadying after hitting three-month lows the day before, helped by investor nervousness over the US economy and by strong demand from top consumer India.
As much of the fear surrounding the euro-zone debt crisis recedes and recent upbeat earnings allay some concern about the outlook for the global economy, gold is likely to encounter more weakness, especially after breaking key technical barriers.
Spot gold was bid at $1,161.30 an ounce at 1514 GMT, against $1,159.65 late in New York on Tuesday. US gold futures for August delivery rose $1.60 an ounce to $1,159.70.
Prices fell nearly 2 per cent on Tuesday as selling of commodities after weak US consumer confidence data pushed the metal through key technical support levels.
"For now, the metal looks very bearish technically and to be honest, all these moves since yesterday are heavily technically driven," said Standard Bank analyst Walter de Wet.
"I think it is going to fall more, but longer term, we still see the bull market intact. Underlying, the same issues that have pushed gold higher still remain," he added.
Commerzbank analyst Daniel Briesemann said that despite the metal's slight recovery this morning, diversification into other assets, seasonal demand weakness and a tendency towards liquidation of long positions are all still pressuring prices.
"There has been a massive increase in risk appetite among market participants," Briesemann said.
"We see money shifting away from safe haven assets like gold to riskier assets like equities and oil."
Risk appetite was helped by strong corporate earnings and the fact that new Basel III capital rules proved less stringent than expected.
From a technical perspective, gold prices are looking vulnerable after breaking through support in the $1,175-1,180 an ounce area, analysts said.
While the risk of further losses remains, analysts said gold should be supported by re-emergent physical demand at lower prices. Traders in India, the world's biggest gold consumer, said buying was picking up as the metal became more affordable.
UBS also said in a note that its gold sales to India on Tuesday matched the second highest this year.
Among other precious metals, spot silver was at $17.47 an ounce against $17.61, spot platinum was at $1,530.75 an ounce against $1,527.15, and spot palladium was at $464.95 versus $464.85. -Reuters