NEW YORK/LONDON (Reuters) - Gold futures climbed above $950 an ounce on Wednesday on lingering economic worries, but the U.S. Federal Reserve’s strong resolve to fight inflation could still pressure the metal in the near term.
Wall Street ended lower after largely holding firm earlier in the session, weighed down by disappointing bank results and a pullback in energy shares.
“There is a lack of confidence in overall economic conditions in the financial markets, and therefore you have gold prices supported at current levels,” said Carlos Sanchez, precious metals analyst at CPM Group in New York.
Risk-aversion demand has been largely absent in the gold market as investors preferred the dollar and U.S. Treasury products to bullion.
Earlier this year, the inverse link between the dollar and gold was broken as both assets rallied amid flight-to-quality type buying from nervous investors.
U.S. August futures settled up $6.40 at $953.30 an ounce on the COMEX division of the New York Mercantile Exchange.
Spot gold was at $950.20 an ounce at 3:40 p.m. EDT (1940 GMT), against $948.15 in its previous session finish.
Despite the U.S. Federal Reserve’s commitment to battle inflation, analysts said the price of gold could hold firm at the current levels until inflationary expectations receded further.
On Tuesday, Fed Chairman Ben Bernanke sought to dispel concerns the U.S. central bank’s aggressive monetary easing could end up fueling inflation, saying he was confident the Fed could pull back its extraordinary stimulus when the time was right.
The dollar .DXY edged lower versus a basket of six major currencies on a steady performance in the stock market and stronger home prices. A weaker dollar supports commodities priced in the U.S. unit, such as gold, as it makes them cheaper for holders of other currencies. <FRX/>
Standard Bank analyst Walter de Wet said $960 an ounce was proving to be a major resistance level for gold prices.
“I would look toward the dollar for any major moves in gold,” he said. “Our view for currencies is that the euro will reach $1.50 toward the end of the year. If that is going to be the case, I don’t think $960 is going to hold as a strong resistance.”
Gold last stood above $960 in early June.
However, investment demand from gold-backed exchange-traded funds remained weak.
The world’s largest gold exchange-traded fund recorded a further outflow on Tuesday. The fund, New York’s SPDR Gold Trust, has sold nearly 39 metric tons of gold in the last four weeks, equal to almost 3.5 percent of its total holdings. <GOL/SPDR>
Jewelry demand in India, the world’s largest gold consumer, remained slack as buyers awaited lower prices, while jewelers in Thailand cashed in their bullion on Wednesday after prices broke through $950 an ounce.
Among other precious metals, silver was at $13.67 an ounce against $13.54, platinum was at $1,170 an ounce from, $1,169, and palladium was at $253 from $253.50.
Editing by Christian Wiessner
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