Gold Decline Fuels Fresh Demand


"Fresh demand emerged after correction from recent record highs."

Gold edged higher Wednesday, rising back above $1,190/0z., as fresh demand emerged after the metal's correction from recent record highs.

Chart support above $1,180/oz. has also helped limit losses in gold, analysts said.

Spot gold was bid at $1,195.25/oz. at 1447 GMT, against $1,191.50 late in New York Tuesday. U.S. gold futures for August delivery were up $0.60 to $1,195.70.

"The general feeling is still of insecurity and, given the drop, people might see (gold) as a bargain, probably more on the speculative side than on the long-term investment side," said Heraeus' Wolfgang Wrzesniok-Rossbach.

Gold has fallen some 6% from its record high of $1,264.90/oz. in June, tempting some buyers back to the market.

In India, jewelers bought stocks ahead of religious festivals, and other physical buyers in Asia snapped up bullion after prices fell.

On the wider financial markets, the euro fell from seven-week highs against the dollar on concerns about the growth outlook for the global economy and as investors scrutinized details of plans to test the financial health of European banks.

Although the usual inverse link between gold and the dollar weakened earlier this year as both benefited from risk aversion, a stronger USD usually makes dollar-priced metals more expensive for holders of other currencies.

Elsewhere European shares turned positive as banks pared losses on optimism that results from impending stress tests may not be as bad as feared.

Gold earlier slipped to a session low of $1,185, its weakest since late May, in earlier trade after China said gold will not become a major component of the central bank's portfolio.

"I am convinced they will increase their gold holdings if prices fall further, said Commerzbank's Daniel Briesemann, "I don't expect gold to fall below $1,000, but if that happened. . .China would buy gold."

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