NEW YORK (Reuters) - Gold turned higher on Tuesday, breaking a two-day losing streak after sharply weaker U.S. housing data whet investor appetite for the metal as a safe-haven investment.
Gold began to rally following the disappointing existing home sales data, and as prices found support after dipping below its 50-day moving average. Bullion could rise to new highs if it breaks above a major technical resistance at $1,240 an ounce, analysts said.
“Gold demand surged as risk appetite started to fall on the much weaker-than-expected U.S. home sales data. When risk aversion rises, we tend to see very strong flow into gold,” said Nick Brooks, head of research and investment strategy of London-based ETF Securities.
Sales of previously owned U.S. homes took a record plunge in July to their slowest pace in 15 years as the wind went out of the housing sector’s sails and underlined a struggling economy.
The news sent U.S. stocks down 1 percent, and crude oil 2 percent lower. U.S. Treasuries -- perceived as the safest asset during economic uncertainty -- rose sharply, sending the two-year yields to yet another record low. .N <O/R> <US/>
Spot gold was at $1,229.40 an ounce at 3:20 p.m. EDT (1920 GMT), versus $1,223.40 late in New York on Monday. U.S. gold futures for December delivery settled up $4.90 an ounce at $1,233.40.
Bullion has been on a rising trend on safe-haven demand amid double-dip recession worries since it bottomed in late July. Gold rallied to a 1-1/2 month high at $1,237.15 an ounce last week after a spate of lackluster U.S. data knocked confidence in the economic recovery.
Technical analysts said gold could rally above its all-time high at $1,264.90 an ounce set on June 21 if it breaches above key chart resistance, the 76.4 percent Fibonacci retracement level near $1,240 an ounce.
“Once December futures get above $1,240 on a settlement basis, this market will be in a whole new chart territory where there is no resistance,” said Scott Meyers, senior analyst at Pioneer Futures Inc.
PHYSICAL DEMAND RISES
Investment demand for gold has increased in recent sessions, with holdings of the world’s largest gold-backed exchange-traded fund, the SPDR Gold Trust, rising by nearly 13 tons last week, its biggest one-week climb since early June. <GOL/SPDR>
ETF Securities’ Brook said new funds flowing into ETFS Physical Swiss Gold Shares totaled $152 million in the two weeks ended Aug 20, the largest two-week inflow into the exchange traded product since it started trading in September 2009.
Gold is also entering into a period when physical demand traditionally plays a bigger role, said VTB Capital analyst Andrey Kryuchenkov.
Physical gold demand tends to rise in August as jewelers stockpile inventory ahead of the start of India’s festival season, which starts with Raksha Bandhan on August 24 and extends until Dhanteras in November, the biggest gold-buying day.
Silver rose by more than 2 percent on pent-up investment demand. It was last at $18.38 an ounce, versus $17.93 on Monday.
The platinum group metals also recouped earlier losses, with platinum last at $1,509.50 an ounce versus $1,504.50 and palladium at $481.50 against $481.
Prices at 3:11 p.m. EDT
Additional reporting by Amanda Cooper and Jan Harvey in London
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