Gold rebounds on oil rally, technical buying

NEW YORK Thu Jul 19, 2012 4:00pm EDT

NEW YORK (Reuters) - Gold rebounded on Thursday after two days of losses, lifted by a drop in the dollar and an across-the-board commodities rally led by oil on increasing geopolitical tensions in the Middle East.

Data showing a surge in U.S. new claims for jobless aid and weaker factory activity in the U.S. Mid-Atlantic region improved the outlook for additional economic stimulus from the Federal Reserve and boosted bullion's investment appeal. <ID:L2E8IJ369>

Bullion, a traditional inflation hedge, has retreated from levels seen earlier this year due to a lack of more-concrete measures by the U.S. central bank to stimulate a slowing economy. This week, Fed Chairman Ben Bernanke again gave no hint of any new round of asset buybacks, or quantitative easing (QE).

"The underlying fundamental story why gold was moving sideways in the past three months is that investors are just not clear whether or not we are going to see another round of quantitative easing from the Fed," said Adam Sarhan, CEO of New York-based Sarhan Capital.

"If we do see more QE, I have to say gold can easily get a bid and shoot right back up to this year's high at $1,800 in a heartbeat," Sarhan said.

Spot gold was up 0.6 percent for the day at $1,581.41 an ounce by 3:11 p.m. EDT (1911 GMT).

Gold's rise on Thursday also brightened its technical outlook as prices have now risen above their 20- and 50-day moving averages (DMA).

However, gold will stay rangebound unless the metal breaks above resistance at $1,655 -- its 200-DMA and two-month high, or falls below $1,523 -- a one-year low, Sarhan said.

U.S. gold futures for August delivery settled up $9.60 at $1,580.40 an ounce, with trading volume about 15 percent below its 30-day average, preliminary Reuters data showed.

Gold drew support from a 3 percent surge in oil as the killing of Syrian security chiefs on Wednesday, and an attack on Israeli tourists in Bulgaria, which Israel accused Iran of carrying out, worsened the crisis in the Middle East. <O/R>

Traders now await Friday's U.S. Commitments of Traders report, which will show managed money's net length in the gold market.

ECONOMIC SLOWDOWN IN FOCUS

Gold is up only 1 percent this year to date after a string of data including weak U.S. job growth pointed to a global economic slowdown.

In February, it was up 15 percent after the Fed said for the first time that it would keep interest rates near zero until at least late 2014.

Fears of deflation and a global economic slowdown have weighed heavily on gold, which is also used by some institutional investors as a hedge against U.S. dollar depreciation.

A Reuters poll of hundreds of economists worldwide showed the global economy would labor against a dismal tide from recession-hit Europe for the rest of this year, but 2013 should bring better growth. <ID:L6E8IJFW2>

Silver gained 0.1 percent to $27.18 an ounce. Spot platinum was up 0.9 percent at $1,412.30 an ounce, while spot palladium rose 1.8 percent at $581.25 an ounce.

(Additional reporting by Harpreet Bhal and Jan Harvey in London; Editing by Dale Hudson and Andrew Hay)

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