Spot gold bounces after slide; Gains seem shaky

Gold prices bounced on the European spot market Thursday, recovering some lost ground from the previous session's slide, although gains are expected to soon run out of steam.

The price of gold skidded 4.3% to a near-three-year low at $1,221.60 a troy ounce on Wednesday as gold investors continued to worry that the U.S. Federal Reserve will start to scale back its stimulus measures. Gold prices rebounded Thursday as some opportunistic buyers stepped in at the lower price levels. A downward revision to the U.S. first quarter domestic product figure on Wednesday helped ease concerns that the U.S. economy is recovering enough to warrant an early tapering of stimulus, said analysts. Gold has benefited from the Fed's bond-buying program in recent years, owing to its appeal as a hedge against currency debasement and inflation.

"We are seeing a recovery movement this morning," said analysts at Commerzbank.

At 0851 GMT, spot gold was up 1.3% at $1,238.51 an ounce. Silver was 1.9% higher at $18.760 an ounce.

Whether gold can retain an upward momentum remains unclear, however. Demand for bullion in major consuming region Asia isn't particularly strong, and investor sentiment in the West remains shaky.

"Given the lack of any fundamental drivers that could conceivably push prices higher, we suspect that rallies will remain vulnerable," said INTL FCStone analyst Edward Meir.

Still, gold's recent slide--which has seen it tumble almost 11% since the start of the month--is starting to look overdone, and prices could start to stabilize at lower levels, said David Govett, head of precious metals at brokerage firm Marex Spectron.

"There is starting to be a feeling, albeit muted, that we may be a tad overdone on the downside for the time being," he said. "I tend to agree and am for the moment going to stand aside from selling rallies and look for the market to settle down and consolidate now."

The release of weekly U.S. jobless claims data later Thursday could provide some direction to prices, said Mr. Govett. A stronger-than-expected figure could raise fresh concerns over the longevity of the Fed's growth-boosting measures.

In other precious metals Thursday, spot platinum was up 1.6% at $1,319.25 an ounce and spot palladium was 2.2% higher at $641 an ounce at 0851 GMT.