Gold steadies in Europe; watches dollar, oil

LONDON - Gold steadied on Wednesday after dropping in earlier trade as the price dip attracted fresh investors and physical buyers, with dealers saying the metal may take further guidance from the currency and oil markets.

By (Reuters)

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Published: Wed 26 Jul 2006, 8:32 PM

Last updated: Sat 4 Apr 2015, 1:09 PM

The metal remained confined in a relatively narrow range this week as gains were quickly erased by profit-takers, while bargain-hunters rushed in to help arrest any steep fall.

“Gold is very neutral here and I see it carrying on in a $600-$640 an ounce range for now. Perhaps it may move slightly higher,” said Tony Dobra, a director at Standard Chartered Bank.

“People are waiting for things to calm down a little. Short term, I still see the sentiment moderately bullish.”

Spot gold XAU fell as low as $613.60 an ounce in Asia before recovering to $617.30/6178.30 by 1204 GMT, compared with $617.60/619.10 late in New York on Tuesday.

“Hopefully a relatively heavy US economic data calendar later this week will move the metal, which has traded in a comparatively narrow range in the past few days,” UBS Investment Bank said in a daily note.

The US Federal Reserve’s beige book survey of economic conditions is due at 1800 GMT on Wednesday, while the US durable goods orders for June will be released on Thursday.

Some dealers said the tension in the Middle East would offer some support to the safe-haven metal.

Fierce fighting raged in Lebanon on Wednesday as an international conference opened in Rome on how to end Israel’s 15-day-old war with Hizbollah guerrillas. [ID:nL26720198]

“The gold market is likely to look to oil prices as a barometer of the geopolitical risk in the region, rather than headline statements,” HSBC Bank said in a daily note.

“A widening of the conflict could be expected to directly impact gold prices.”

Oil rose towards $74 a barrel, with dealers keeping a close watch to see if US crude and gasoline stocks fell last week and whether the Rome conference can help end the violence.

Bullion is generally seen as a hedge against inflation.

In the currency market, the dollar ticked lower against the euro, making gold cheaper for holders of other currencies.

“Given a lack of clear direction and failure of gold to convincingly hold onto gains above the 100-day moving average, gold could settle into consolidation largely revolving around this level,” Standard Bank said.

The average stood at about $617 an ounce on Wednesday.

In industry news, Russia’s gold output in the first half of 2006 rose 2.9 percent to 57.09 tonnes from a year earlier as production of the metal as a by-product rose.

Platinum XPT little changed at $1,218/1,224 an ounce, while palladium XPD inched higher to $312/317 an ounce from $310/315 in the US market.

Silver XAG ticked lower to $10.86/10.96 an ounce from $10.89/10.99 in New York.

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