Gold ends up on bargain hunting despite weak oil

NEW YORK (Reuters) - Gold futures ended higher on Tuesday as investors snapped up bargains following their recent price weakness, but oil’s extended decline lessened inflation worries, limiting further gains in the metal.

A shop attendant arranges gold jewellery inside a shop in the southern Indian city of Hyderabad June 30, 2009. REUTERS/Krishnendu Halder

A combination of weakened investment demand and slowing gold jewelry buying has weighed heavily on bullion after it rose toward $1,000 an ounce in early June because of inflation worries following massive economy stimulus plans by central banks.

Miguel Perez-Santalla, vice president of sales of Heraeus Precious Metals Management in New York, said that the precious metals complex in general strengthened on Tuesday due to the dollar weakness.

However, “inflation has not showed, and people are getting impatient of having their money are sitting in the metal doing nothing,” Perez-Santalla said.

U.S. August futures settled up $4.80 at $929.10 an ounce on the COMEX division of the New York Mercantile Exchange.

Spot gold traded at $927.85 an ounce at 2:36 p.m. EDT against $924.00 an ounce late in New York on Monday, having earlier touched a high of $931.55.

Gold climbed on Tuesday as a sharply weaker equities markets prompted investors to switch funds into the hard asset precious metal sector.

The metal also rose in spite of a higher dollar. Investors recently preferred the U.S. currency to bullion as a safe store of value amid fears over the economic outlook.

U.S. crude oil futures extended the previous session’s losses, falling toward $62 a barrel on economic worries.

Oil’s recent decline failed to boost gold as a hedge against inflation, traders said.

The market is looking for any comments on the dollar’s role as the global reserve currency at the Group of Eight leaders’ meeting starting on Wednesday, which could impact on the foreign exchange markets and consequently on gold.


Technically, the picture is looking weaker, with gold’s trade down through the 100-day moving average opening up the potential for a move down to $915, Weeks added.

Investment demand remained relatively soft, with holdings of the largest gold-backed exchange-traded fund, the SPDR Gold Trust, falling 0.36 tonnes on Monday. <GOL/SPDR>

Switzerland’s Zurich Cantonal Bank, however, reported modest inflows into its gold and silver ETFs last week.

Physical demand for bullion bars has improved slightly in the last week or so, dealers say, but is far from its peak.

“Investment demand for gold has stalled, and that has been the key support for gold for much of the first half,” said David Wilson, metals analyst at Societe Generale.

Among other precious metals, silver was at $13.18 an ounce against $13.24. Platinum was at $1,134.50 an ounce against $1,143, while palladium stood at $239.50 against $239.

Both platinum group metals have suffered from the downturn in the car industry, their main consumer. Any sign of a recovery in the sector could trigger a turnaround, analysts said.

Additional reporting by Jan Harvey in London; Editing by Christian Wiessner