Gold flat as safe haven bid eases after rally

By Frank Tang

NEW YORK (BestGrowthStock) – Gold prices were largely flat on Thursday after hitting near five-month highs in the previous session, as a flight to safety fizzled amid hopes that a euro-zone debt crisis would be dealt with swiftly.

Strong investment demand driven by renewed supply concerns from top producer South Africa, and a Wall Street rally amid better economic sentiment, boosted platinum group metals (PGM).

An upbeat outlook on the U.S. economy from the Federal Reserve sharpened appetite for riskier assets such as equities and took some momentum away from gold, analysts said.

Jason Schenker, president of Texas-based Prestige Economics LLC, said that gold’s safe-haven demand was easing on positive economic data led by better U.S. jobless claims data.

“There has been a flight to quality over the past couple of days. Today, across a number of different markets, you can see crude and the dollar easing as the markets are settling in,” Schenker said.

Spot gold was at $1,168.45 an ounce at 2:54 p.m. EDT (1954 GMT), against $1,164.45 late in New York on Wednesday.

Gold on Wednesday hit its highest level this year at $1,174.18 an ounce after Standard & Poor’s cut its credit ratings on Spain, a day after downgrading the ratings for Greece and Portugal.

U.S. gold futures for June delivery on the COMEX division of the NYMEX settled down $3 at $1,168.80.

The euro rose for a second straight day on Thursday, rebounding from a one-year low in the prior session, boosted by hopes a bailout plan for Greece will be larger than previously thought and allow it to avoid a debt restructuring. (USD/: )

“Gold has benefited from the sovereign debt problems, which reached a head the day before yesterday,” said Credit Agricole analyst Robin Bhar.

“We have had some calmer markets since the first wave of panic hit the markets then subsided. But it is still supported by those fears.”

Global equities rose as the Fed’s more upbeat view of the U.S. economy eclipsed the euro zone’s debt issues, and the U.S. S&P 500 index marked its largest daily advance in nearly eight weeks. Oil prices also rose sharply. (O/R: )

INVESTMENT DEMAND UNDERPINS

Traders said that strong performance of gold-backed exchange traded funds should support the price of the metal.

Investment interest in gold was firm, with holdings of the world’s largest gold exchange-traded fund, the SPDR Gold Trust, hitting a record 1,152.9 tons on Wednesday. (GOL/SPDR: )

Holdings of a London-based gold ETP (PHAU.L: ), operated by London’s ETF Securities, rose 29,450 ounces on Wednesday to 3.521 million ounces, their highest level since October last year.

Among other precious metals, PGM prices climbed on worries over a potential supply shortfall from top producer South Africa due to an ongoing electricity crisis.

A senior official from South Africa’s power utility Eskom said he is confident it will be able to meet this year’s power demand, including during the World Cup, but supply will be tight from 2011-2012 unless new capacity is brought on stream.

Platinum was at $1,729 an ounce against $1,707, and palladium at $548 against $538.50.

Rising investment interest also boosted PGMs. Holdings of ETF Securities’ U.S. platinum and palladium ETFs exceeded 1 million ounces combined since the funds’ inception in January.

Silver was at $18.47 an ounce against $18.06.

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(Additional reporting by Jan Harvey and Veronica Brown in London; editing by Jim Marshall)

Gold flat as safe haven bid eases after rally