Gold up on economy woes, uptrend continues

By Frank Tang

NEW YORK (BestGrowthStock) – Gold was slightly higher on Wednesday, remaining on an upward trend driven by worries about a double-dip recession.

The metal has outperformed most other commodities for the second quarter.

Traders cited follow-through buying after the previous session’s gains in a global equity market sell-off, as investors fretted over a stalling economic recovery and a widening European debt crisis.

Frank McGhee, head precious metals trader at Chicago-based Integrated Brokerage Services LLC, said gold was still in a upward trend and remained well supported by wider economic concerns.

“The market can be susceptible for a short-term correction, as gold prices are now trading at a fair distance above most moving averages,” McGhee said.

The precious metal is the best-performing metal and one of the few bright spots in commodities for the second quarter, defying a double-digit decline in the S&P 500 stock index amid investor jitters.

The price of gold rose more than 11 percent in the second quarter, as safe-haven demand lifted the metal to its best quarterly performance since the fourth quarter of 2007.

Spot gold was at $1,242.60 an ounce at 2:26 p.m. EDT, against $1,238.00 late in New York on Tuesday. U.S. gold futures for August delivery settled up $3.50 at $1245.90 an ounce.

Gold in early trade retreated on a disappointing U.S. private-sector jobs report and as low demand at the European Central Bank’s latest bank refinancing operations eased some concerns over euro zone bank finances.

The ADP jobs report is seen as an important precursor to Friday’s key non-farm payrolls data, a closely watched barometer of the U.S. economic recovery.

Demand for physical gold as an investment vehicle remained strong, with holdings of the world’s largest gold-backed exchange-traded fund (ETF), New York’s SPDR Gold Trust, rising to a record 1,320.436 tonnes on Tuesday.

“The large gold ETF holdings are reminding traders that gold is now another currency, and the ADP employment numbers keep recovery thoughts on the back burner,” said George Gero, vice president of RBC Capital Markets Global Futures.

GOLD OUTPERFORMS IN H2

Among other commodities, oil and base metals both gave up early gains to fall after the jobs data, and remain under pressure from concerns over the economic recovery. (O/R: )

Most commodities are heading for a weak end to the first half, with many on course for their first quarterly loss in 18 months, under pressure from a toxic mix of risk aversion, equity losses and debt worries.

In this environment, gold tended to outperform. It has risen the most among metals in percentage terms in the second quarter.

In Hong Kong, premiums for gold bars, a key indicator of demand, rose. Meanwhile dealers reported scrap sales in India, the world’s biggest gold market, were lackluster despite high prices as potential sellers bet on further gains.

“Selling (of scrap) is at zero. For the last one week it has been like this because people are waiting for prices to hit 20,000 rupees ($429) per 10 grams,” said Jitendra Kantilal, partner at Jugraj Kantilal & Co, a scrap buyer in Mumbai.

Among other precious metals, silver was at $18.58 an ounce against $18.46, platinum at $1,534.50 an ounce versus $1,539.50, and palladium at $443 against $450.

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(Additional reporting by Jan Harvey in London; Editing by Sofina Mirza-Reid)

Gold up on economy woes, uptrend continues