Gold edges off 3-1/2 month low as stocks retreat

London (May 28)  Gold buying in the price-sensitive Asian markets remained soft on Wednesday, traders said, with Chinese demand failing to pick up despite the sharp overnight drop in prices.

"We have had a $30 price drop and still no jump in Chinese premiums. That is not supportive," Victor Thianpiriya, an analyst at ANZ, said.

Prices for 99.99 percent purity gold on the Shanghai Gold Exchange were about $2-$3 an ounce above global prices, little changed from Tuesday's premiums. The price differential between Chinese prices and global prices is considered a good measure of demand.

Trade data on Tuesday showed that China's imports of gold from main conduit Hong Kong fell to a 14-month low in April as importing banks were adequately stocked amid softer demand and a weaker yuan.

From a technical perspective, the metal remains vulnerable to further losses, according to analysts who study past price moves to determine the future direction of trade.

"Important support at $1,262.62, the 62 percent retracement of December-March advance ... is currently under test," UBS said in a note. "A close below this will be an outright bearish picture, suggesting a deeper selloff over the longer term."

Among other precious metals, silver was up 0.2 percent at $19.09 an ounce, while spot platinum was up 0.1 percent at $1,457.99 an ounce and spot palladium was up 0.8 percent at $836 an ounce.

New South African mining minister Ngoako Ramatlhodi said on Wednesday he understood that talks, mediated by a labour court judge, between platinum mining companies and the striking AMCU union had broken down.

The platinum strike is now in its fifth month.