Gold price holds off 8-week lows as stock markets retreat

London (May 11)  Gold rose on Thursday as European and U.S. stock markets retreated, though it pared gains after data showing a tightening jobs market and accelerating inflation lifted the dollar and pulled U.S. bond yields from earlier lows.

The metal is consolidating after sliding to its lowest in eight weeks on Tuesday at $1,213.81, analysts said.

Spot gold was up 0.2 percent at $1,221.24 an ounce at 1330 GMT, following eight sessions in which prices have been
flat or fallen. Earlier it climbed as high as $1,224.20.

"It looks like gold is following stocks and the U.S. dollar, but overall I would say it may have found a bottom, at least for
the time being," Afshin Nabavi, head of trading at MKS in Switzerland said. "All we need is some good physical demand."

Some physical buying has come through of late, he said, but
not as much as would have been expected given the price drop.
"Premiums have been rather poor," he said.  
    U.S. gold futures         were 0.2 percent higher at
$1,221.40 an ounce.
    Analysts at ScotiaMocatta said the metal would struggle to
rise above technical resistance at its 100-day moving average,
now at $1,226. Support for the metal was at $1,195, they said.
    Expected interest rate rises this year by the U.S. Federal
Reserve will put pressure on bullion, ABN Amro analyst Georgette
Boele said.
    "There is a risk that gold may go to $1,200 in the coming
weeks or months. But that would only be temporary," she said,
forecasting a weaker dollar later in the year.
    Gold is highly sensitive to rising U.S. rates, which
increase the opportunity cost of holding non-yielding bullion,
while boosting the dollar, in which it is priced.
    Among other precious metals, silver        was up 0.4
percent at $16.20 an ounce and platinum        was 0.1 percent
higher at $909.41.
    Platinum producer Lonmin said on Thursday protesters
demanding jobs were disrupting output, damaging property and
intimidating employees around its Marikana operations in South
Africa. That lent little support to prices, however.
               
    Palladium        was up 0.3 percent at $800.55 an ounce. The
metal used in the automotive industry for emission-controlling
catalytic converters is around two-year highs, but Commerzbank
analyst Carsten Fritsch said recent car sales had disappointed.
    "This points to lower demand for palladium if China and the
U.S. – the two leading demand markets – show continued
weakness," he said in a note.
    Chinese auto sales posted their steepest fall in almost two
years in April, the automakers' association said on Thursday, as
a tax increase on small-engine cars from the start of the year
discouraged buyers.

Source: Reuters