Gold rises 1 percent on technicals, uncertainty

By Frank Tang

NEW YORK (BestGrowthStock) – Gold rose 1 percent on Tuesday on technical buying as prices rebounded from near two-month lows in the previous session, and as weak U.S. housing data stirred economic uncertainty.

Bullion has not staged a sustained rally in the past five sessions, and prices on Monday fell toward an important bullish support level, which was seen as a natural market entry point, technical analysts said.

Gold benefited from economic worries after another lackluster U.S. housing indicator offered further evidence that the economy lost momentum in the second quarter. Traders also cited jitters related to Friday’s outcome of stress tests on European banks.

“There is a lot of uncertainty in the market, as gold bounced off and held above key support levels at $1,175-1,180 in the last two sessions, and we are seeing real strong buying below that level,” said Sean Lusk, market specialist at Chicago-based futures broker PFGBest.

Lusk also cited short-covering for gold’s gains.

Spot gold was at $1,192 an ounce at 2:36 p.m. EDT, against $1,180.35 late in New York on Monday, having earlier slipped as low as $1,175.35, the weakest price since May 24.

U.S. gold futures for August delivery settled up $9.80 an ounce at $1,191.70.

Gold prices gradually moved higher after data showed U.S. housing starts hit their lowest level in eight months in June. This came after a Monday report indicated homebuilders’ confidence tumbled to a 15-month low.

“Where there is uncertainty in the market, gold and precious metals seem to benefit the most,” said Jeff Pritchard, a broker at California-based Altavest Worldwide Trading.

“(If) we see really good results from the (Euro bank) stress tests, gold will take the biggest hit, but if there is more uncertainty and it creates more foreseeable problems, we could see an extension to this rally in gold,” he said.

GOLD MOVES IN TANDEM WITH DOLLAR

Gold rose as the euro retreated from a 10-week high against the dollar as weak U.S. earnings dulled risk appetite and investors took profits on euro gains ahead of European bank stress test results due Friday. (FRX/: )

On Tuesday, the dollar firmed against a basket of currencies. Historically, a stronger dollar has been negative for gold, as it curbs gold’s appeal as an alternative asset and makes dollar-priced commodities pricier for other currency holders.

That inverse relationship has reversed since the start of the year as both benefited from risk aversion.

(Graphic: http://link.reuters.com/mut58m)

“Gold retains its positive correlation to the dollar, although … this relationship continues to soften,” said UBS analyst Edel Tully.

On Tuesday, independent investor Dennis Gartman said in a note that he has halved his gold holdings after recent selling. Last Friday, Gartman said that he needed to reassess his long-held strategy of buying euro-denominated gold.

Among other precious metals, silver was at $17.68 an ounce, against $17.51. Platinum was at $1,518 an ounce, against $1,509, and palladium at $449 against $441.45.

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(Additional reporting by Jan Harvey and Maytaal Angel in London; Editing by Walter Bagley)

Gold rises 1 percent on technicals, uncertainty