Gold edges up ahead of EU summit, trading quiet
NEW YORK |
NEW YORK (Reuters) - Gold edged up in quiet trading on Wednesday, as many bullion investors stayed on the sidelines awaiting news from a European Union summit to address the region's debt crisis.
Equities and other commodities posted much sharper gains than gold. Even after the day's modest rise, the precious metal has dropped 3.5 percent in the past six sessions on fears that Europe's crisis might slow the global economy and dent bullion's appeal as a hedge against inflation.
There were also signs that physical demand for gold was waning in major consuming country India and elsewhere.
"The primary focus now seems to be the dreaded potential deflationary pressures (but) deflation would be more believable if the European economy were more stable," said Carlos Perez-Santalla, a precious metals broker at PVM Futures.
EU leaders, set to begin a two-day meeting on Thursday, appeared more openly divided than at any time since the crisis erupted in 2010 after Greece revealed its mounting debt.
Gold investors looking for more monetary stimulus to boost the European economy are likely to be disappointed as German Chancellor Angela Merkel brushed aside calls from Spain and Italy for emergency action to cut their soaring borrowing costs.
But Perez-Santalla said European governments will have to add more stimulus eventually, due to the severity of the debt crisis among EU countries and banks.
Spot gold was up 0.2 percent at $1,575.16 an ounce by 3:10 p.m. EDT (1910 GMT).
U.S. gold futures for August delivery settled up $3.50 at $1,578.40 an ounce. Trading volume was about half its 30-day average, preliminary Reuters data showed.
Silver fell 0.6 percent to $26.92 an ounce.
The commodities complex, as measured by the RJ/CRB index .CRB, rose 1.5 percent, as oil prices rose on tighter North Sea supplies and a drop in U.S. crude and distillate stocks. A rebound in energy prices boosted Wall Street.
So far this year, gold has tended to move in tandem with riskier assets like oil and equities. In previous years, investors often flocked to gold as a safe haven, driving its price higher in response to economic fears.
PHYSICAL DEMAND LANGUISHES
The gold market has lacked clear direction this week. The metal rose nearly 1 percent on Monday on safe-haven bids as equities and oil sold off, but it gave up those gains the next day on worries of a global economic slowdown.
Gold demand languished in India as record-high local prices resulting from the weak rupee kept buyers on the sidelines. Traders in India are also waiting for the monsoon to pick up, which could boost the income of farmers, who buy more than half of India's gold. <GOL/AS>
On Tuesday, data from three major mints in Europe and North America showed gold coin sales fell in the first quarter as demand for small investment products eased after helping send gold to record highs in 2011.
Spot platinum was down 1.1 percent at $1,403.75 an ounce, while spot palladium dropped 3 percent to $573.53 an ounce.
(Additional reporting by Jan Harvey in London; Editing by Dale Hudson and David Gregorio)
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