Gold edges up, still near 4-week low ahead of Yellen, U.S. data
London (July 15) Gold rose on Tuesday as European equities moved lower, but was still trading near its lowest level in almost four weeks ahead of the Federal Reserve's Chair testimony to U.S. Congress that should give more clues about the timing of an interest rate hike.
Spot gold was up 0.4 percent at $1,311.90 an ounce by 1021 GMT, after falling more than 2 percent, its biggest daily drop since December, on Monday, when it touched its weakest since June 19 at $1,302.90.
The metal had posted three consecutive weeks of gains, reaching a near-four month high of $1,345 on July 10 on increased buying after banking troubles in the euro zone periphery drove investors towards assets perceived as safer.
U.S. gold futures for August delivery gained 0.4 percent to $1,312.30 an ounce.
"Gold had a good two-week run-up, helped by bigger events like the Portuguese banking troubles, and then it gave it all back in one afternoon, which may have damaged people's faith in the metal," Societe Generale analyst Robin Bhar said.
"Obviously, after the big drop yesterday, there is a bit of bargain hunting but the dollar has strengthened and now it all depends on the retail sales data later today and Yellen's speech, but we don't expect any surprise there."
European shares were slighlty lower on Tuesday, while the dollar inched up 0.1 percent versus a basket of currencies.
Bullion investors were eyeing U.S. retail sales data for June could, which help predict second-quarter growth, and Federal Reserve Chair Janet Yellen's testimony in a U.S. Senate committee later on Tuesday for signs of when the Fed would begin increasing interest rates.
Gold had also come under pressure after strong U.S. job reports earlier this month stoked speculation of an early hike in rates. Higher interest rates would encourage investors to switch to assets that, unlike gold, pay interest.
GEOPOLITICS SUPPORTS
The metal was however supported by developments in the Middle East and Ukraine. Any escalation in violence creates fresh safe-haven demand for gold.
Israel approved an Egyptian-proposed deal that would halt the week-old Gaza shelling war on Tuesday but the Palestinian territory's dominant Hamas Islamists responded suspiciously, saying they had not been consulted by Cairo.
Ukraine said on Monday that Moscow was once more building up its troops on the joint border and accused Russian army officers of fighting alongside separatists in the east of the country.
Holdings in the SPDR Gold Trust - the world's largest gold-backed exchange-traded fund - rose 8.68 tonnes to 808.73 tonnes on Monday.
Domestic prices in top buyer China fell to a discount to the global benchmark on Tuesday, from being on par in the previous session, in a sign of weak physical buying.
Demand in other parts of Asia was also subdued, dealers said.
"What is worrying is that even with the $30 price drop, there seems to be no real increase in physical buying. That could also add pressure to prices," said a precious metal trader in Singapore.
Platinum rose 0.3 percent at $1,492.00 an ounce, while palladium was unchanged on the day at $868.10 an ounce and silver gained 0.4 percent to $20.95 an ounce.
