SINGAPORE, May 24: Gold hovered near $1,560 an ounce on Thursday, remaining on shaky ground as worries about Greece and the euro zone continued to dominate market sentiment after a European Union summit yielded few practical steps to manage the debt crisis.
Gold, typically a safe-haven option, has been moving in tandem with riskier assets as the euro zone debt problem grinds on. Senior officials have advised European leaders to prepare contingency plans in case Greece quits the single currency, although the EU urged Athens to stay the course on austerity.
Light buying in the physical market emerged when prices dropped near a key support level near $1,530 in the previous session, but that has eased with selling trickling in as prices rebounded.
‘Clients are not too interested in entering the market right now,’ said a Singapore-based dealer. ‘They are worried that if Greece eventually pulls out of the euro zone, the euro will fall and drag gold down with it.’
Spot gold was nearly flat at $1,559.60 an ounce by 0327 GMT, after dropping to $1,533.41 in the previous session.
U.S. Gold gained 0.7 percent to $1,559.50.
Gold’s room on the downside might be limited, as investors with faith in bullion for longer term will likely return if prices weaken, some analysts argued.
‘We’ll see buy-on-dip type of purchases from investors and even central bank buying if prices fall below $1,530 an ounce,’ said Li Ning, an analyst at Shanghai CIFCO Futures.
‘But on the upside gold is still facing a lot of pressure from a stronger dollar.’
The dollar index stayed near its highest level since September 2010, as the euro wallowed near a two-year low against the greenback.
China’s factories took a hit in May as export orders fell sharply, said the HSBC Flash Purchasing Managers Index, adding to concerns of global growth, which is already under threat from the deepening euro zone crisis.
Worries about Greece outweighed concerns about potential supply shortage in platinum caused by a shutdown of the world’s biggest platinum mine Rustenburg. Spot platinum edged down 0.2 percent to $1,415.75, up from a four-month low of $1,400.9 hit on Wednesday.
Spot palladium dropped to $583.18 in the previous session, its lowest in nearly six months, before recovering some lost ground to $590.70 on Thursday. (agencies)
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