April 17, 2012 / 12:51 AM / 7 years ago

Gold closes flat after recovering on Wall Street rally

NEW YORK/LONDON (Reuters) - Gold ended nearly flat on Tuesday after a Wall Street rally lifted the metal off lows hit earlier in the session, halting a two-day bullion drop brought about by euro-zone debt jitters.

Gold Bullion from the American Precious Metals Exchange (APMEX) is seen in this picture taken in New York, September 15, 2011. REUTERS/Mike Segar

Bullion, which has tended recently to follow equities, rose nearly $20 from its morning low after a slew of encouraging U.S. corporate results led by Goldman Sachs Group Inc’s (GS.N) fuelled a 200-point jump in the Dow.

The metal lost 2 percent in the prior two sessions as markets broadly weakened on worries that Spain, one of the euro zone’s largest economies, might soon struggle to repay its debt.

Renewed European debt fears, however, could boost gold’s safe-haven appeal and break the positive link between the metal and riskier assets, analysts said.

“We expect that if European credit conditions continue to deteriorate, gold (along with the dollar) could start to better reflect the growing tensions by moving higher,” said Edward Meir, metals analyst at INTL FCStone.

Spot gold was off 0.1 percent at $1,650.75 an ounce by 2:37 p.m. EST (1837 GMT), recovering from the early low at $1,634.44.

U.S. gold futures for June delivery settled up $1.40 at $1,651.10 an ounce. Trading volume was weak for a second day at about 30 percent below its 30-day average, preliminary Reuters data showed.

“Gold has been unable to make a new interim high since the autumn of last year, with each new high being progressively lower than the previous one,” investor and analyst Dennis Gartman said in a note.

Gold looks technically vulnerable. Its price is well below the 50-day moving average, which had defined the metal’s bull run since early 2010, and a break below $1,625 an ounce could spark a sell-off, he said.

While concerns about chaotic defaults among peripheral euro zone economies supported gold as a safe haven last year, a brighter U.S. economic outlook and diminished hopes of further U.S. monetary easing have recently pressured the metal.

PHYSICAL DEMAND LAGGING

Physical gold demand has softened a touch this year from last year’s levels. American Eagle gold coin sales from the U.S. Mint fell 30 percent in the first quarter, and demand in India, historically the world’s biggest gold consumer, has been light.

India’s central bank cut interest rates on Tuesday for the first time in three years by an unexpectedly sharp 50 basis points. If this stimulates economic growth, it is likely to prompt more gold buying.

Among other precious metals, silver was up 0.8 percent at $31.69 an ounce, spot platinum climbed 0.8 percent at $1,581.49 an ounce and spot palladium rose 1.6 percent to $658.72 an ounce.

Additional reporting by Amanda Cooper in London; Editing by Dale Hudson and Alden Bentley

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