Gold springs back in Europe

Gold bounced back from a one-week low hit in earlier trade on Thursday, as a weak dollar prompted buyers to pick up bargains, although analysts expect the rebound will be short-lived. The possible sale by Cyprus of 400 million euros’ worth of gold reserves, heavy outflows from exchange-traded funds and uncertainty over the US Federal Reserve’s stimulus programme are expected to continue weighing on sentiment. 

Gold rose 0.4 percent to $1,564 by 1505 GMT, having fallen to its lowest since April 5 at $1,553.10 an ounce in earlier trade. On Wednesday prices posted their biggest one-day fall since February 20, accelerating losses after news of the Cyprus gold sale plan. “It’s a combination of factors including some bargain hunting, a weaker dollar and low volumes as people are taking a step back after jobless claims came in slightly better than expected but the four-week average continues to hold above the prior reading,” VTB Capital analyst Andrey Kryuchenkov said. 

“The focus on US economic data is bound to become more acute in the coming weeks and months as the market searches for clues on whether the current momentum of opinion at the Fed continues or stalls,” UBS said in a note. Gold prices started the day in negative territory as a European Commission assessment, dated April 9, of what Cyprus needs to do as part of its European Union/International Monetary Fund bailout showed the island is expected to sell in excess gold reserves to raise around 400 million euros ($523 million). 

At current prices, 400 million euros’ worth of gold amounts to around 10 tonnes of metal. Cyprus’ total bullion reserves stood at 13.9 tonnes at end-February, according to data from the World Gold Council. “The Cyprus news has damaged gold in the past hours… and rallies are there to be sold at the moment,” Societe Generale analyst Robin Bhar said. Holdings of the largest gold-backed exchange-traded-fund (ETF), New York’s SPDR Gold Trust GLD, fell 1.4 percent to 38.051 million ounces on Wednesday. Silver was up 0.5 percent at $27.74 an ounce. Spot palladium, which fell to its lowest in three months in the previous session, was up 2 percent to $732.46, while spot platinum was up 0.7 percent at $1,532.99 an ounce. 

Copyright Reuters, 2013

Muhammad Ramzan Rafique
Muhammad Ramzan Rafique

I am from a small town Chichawatni, Sahiwal, Punjab , Pakistan, studied from University of Agriculture Faisalabad, on my mission to explore world I am in Denmark these days..

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