Gold steadies as stocks decline in Europe
Frankfurt (May 28) Gold prices edged off 3 and a half month lows on Wednesday as stock markets weakened in Europe, having earlier extended losses after a technical breakout the previous day saw prices slide more than 2 percent.
Gold posted its biggest daily fall since mid-December on Tuesday after strong U.S. data helped send U.S. and German stocks to record highs, with losses accelerating as prices broke out of the narrow range they'd held in for more than a month.
Spot gold initially extended losses on Wednesday to a low of $1,260.74 an ounce, but had recovered to $1,265.33 an ounce at 0934 GMT, up 0.2 percent. U.S. gold futures for June delivery were flat at $1,265.50 an ounce.
A decline in European stocks after a strong rally in Asia and the United States, and a rise in holdings of bullion-backed exchange-traded funds, have helped the metal recover from early lows, analysts said.
"(A) technical break out of the triangle kicked off (the fall yesterday), which then accelerated when U.S. data surprised and U.S. stocks hit new records," Saxo Bank's head of commodity strategy Ole Hansen said. "Adding to this (was) data which showed China gold imports from Hong Kong falling to a 14-month low."
"There are not that many bullish themes to latch onto," he added. "The election of what seems to be a strong man in Ukraine may help relations with Russia, at least that's the view the market is now taking. All is not lost though. ETP holdings jumped yesterday... Today the $1,262.70 (level) remains the key. Any additional selling should run out of steam ahead of $1,245."
European stocks were down 0.2 percent, bucking the trend for rising global markets which had been shored up by strong U.S. economic data on Tuesday.
The euro traded near a three-month low as expectations solidified for a multi-pronged attack on monetary policy by the European Central Bank next week. Comments this week by ECB President Mario Draghi were read as confirming the bank is on course to ease policy significantly.
Chinese buying soft
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.
