Gold regains lost ground as bargain hunting supports

By Rujun Shen

SINGAPORE (BestGrowthStock) – Spot gold regained lost ground on Monday, as bargain hunting trickled in after prices dropped about one percent in early trade in response to China’s interest rate increase on Saturday.

Spot gold fell to a one-week low of $1,371.10, before recovering to $1,384.80 an ounce by 0545 GMT (12:45 a.m. ET), up 55 cents from the previous close.

U.S. gold futures pulled back from a 0.4-percent decline to $1,386.2, up 0.4 percent.

“Earlier speculators were selling on China’s rate hike news, but a lot of buying has since emerged as speculators are buying on dip,” said a Tokyo-based dealer.

Spot gold is technically neutral as it is rangebound between $1,360 and $1,392 per ounce, but the bias seems to be with the bulls, Reuters market analyst Wang Tao said.

Spot silver fell as much as 1.6 percent to a one-week low of $28.75 an ounce, and recovered to $29.24 an ounce, up 0.1 percent.

Spot platinum gained 0.7 percent to $1,734.50 an ounce, and palladium rose by one percent to $760.97, both reversing early losses.

China’s central bank raised interest rates on Saturday for the second time in just over two months as it stepped up its battle to rein in stubbornly high inflation.

“The market had been worried about more tightening moves from China. Now that the news is out, it almost came as a relief,” said Li Ning, an analyst at Shanghai CIFCO Futures.

Commodity markets pared early losses after the initial selling-off, focusing instead on positive fundamentals and threats to supply.

Robust physical demand in the region was seen supporting the sentiment in the precious metals market.

“Some speculators liquidated their positions earlier, but we also see very good physical demand in the market today,” said Peter Fung, head of dealing department at Wing Fung Precious Metals in Hong Kong.

Fung expected the rate hike to pressure gold prices in the short term, but physical buying is expected to emerge once prices dip below $1,370.

“Gold is likely to be traded in the range of $1,360 to $1,390. In the medium-term, gold is still looking up,” Fung said.

Thin trade at the year-end tends to exaggerate price moves, traders also said.

The dollar edged down against a basket of currencies on Monday.

(Editing by Himani Sarkar)

Gold regains lost ground as bargain hunting supports