London: Gold prices steadied on Wednesday after falling nearly 2 per cent in the previous session, underpinned by escalating tensions in Ukraine and dollar softness but still under pressure from a weak chart picture and concerns over a slowdown in Chinese demand.
Ukrainian government forces and separatist pro-Russian militia staged rival shows of force in eastern Ukraine amid escalating rhetoric on the eve of crucial four-power talks in Geneva on the former Soviet country’s future.
That helped gold steady after the metal broke through a 200-day moving average at $1,300 an ounce on Tuesday, unleashing stop-loss selling that took spot prices to a low of $1,290.34.
Spot gold was up 0.1 per cent to $1,303.50 an ounce at 1310 GMT. US gold futures for June delivery rose $3.90 an ounce at $1,304.20.
“The market is very nervous but the clear-out of longs yesterday has left it in a better position to make a small upside attempt initially towards $1,313,” Saxo Bank head of commodity strategy Ole Hansen said.
“The upside however is littered with resistance now and safe-haven buying only seem to be working less than 24 hours at a time,” he added. “Renewed dollar weakness always help and at the same time Ukraine still carries the ability to spook the market which makes it a bold call to go short at this stage.” After reaching a peak on Monday, gold was hit by a wave of selling as a firmer dollar and concerns over demand from top consumer China pushed it through a series of key chart levels.
The dollar eased 0.1 per cent against a basket of currencies on Wednesday after US housing starts data rose less than expected in March and building permits fell, pointing to underlying weakness in the housing market that could persist despite better weather.
Scheduled comments from Federal Reserve speakers including Fed Chair Janet Yellen will be the next market focus.
Stock markets made broad gains after China reported economic growth a touch above forecasts, a relief for investors who had feared a much weaker outcome, although concerns over Ukraine kept a lid on gains.
Chinese buying weak
Slack demand from China continued, with interest not improved by Tuesday’s price fall.
“There was some chatter of the Chinese likely to have some physical interest at these levels, but on the contrary they were sellers on the open and the catalyst for the metal falling through $1,300,” MKS said in a note.
Chinese consumption has already been hit over the last few weeks by discounted rates in the local market as banks, which hold ample stock, held off buying as the yuan weakened.
Chinese retail data showed jewellery sales fell 6 per cent in March, the first monthly drop in at least two years.
On the investment side, holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.60 tonne to 806.82 tonnes on Tuesday, in the second straight day of inflows after three weeks of outflows.
Among other precious metals, silver was up 0.2 per cent at $19.63 an ounce, having dropped to a two and-a-half month low at $19.24 an ounce on Tuesday. Spot platinum gained 0.3 percent at $1,439.70 an ounce, while spot palladium rose 0.9 per cent at $798.47 an ounce.
