* Rally in U.S. equities helps lift gold in late trade
* China says gold won't be major part of currency reserves
* Indian buyers rush to buy gold after price fall
(Recasts; updates prices, quotes; changes dateline from
LONDON)
By Carole Vaporean
NEW YORK, July 7 (Reuters) - Gold prices recovered from
early losses late Wednesday, rising from a 6-week low to above
$1,200 an ounce, as equity markets rallied, the euro renewed
its advance on the dollar and a corrective decline was seen to
have run its course.
Gold's technical losses were viewed as therapeutic, shaking
out players with weak long positions and dropping prices to
levels where fresh demand could emerge after the precious
metal's June 21 rise to record highs, analysts said.
Spot gold <XAU=> was at $1,200 an ounce by 2:21 p.m. (1821
GMT), higher than $1,191.50 late in the previous session.
Earlier, the low slipped to $1,185.05 an ounce, a level last
seen on May 25.
U.S. gold futures for August delivery <GCQ0> finished $3.80
higher at $1,198.90 an ounce on the COMEX metals division of
the New York Mercantile Exchange. It, too, slid to a
6-1/2-month low in early trade, but later recovered.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Reuters Insider shows on:
Deflation or Inflation Lurking in Gold Rally? (Inside Fixed
Income) http://link.reuters.com/xyj36m
Reduce Allocation of Stocks in Favour of Gold, Says Market
Strategist (Inside Commodities and Energy)
http://link.reuters.com/gat95m
Gold Miners Overvalued vs Broad Market, Analyst Says
(Inside Equities)
http://link.reuters.com/was55m
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
"Looking at today, first of all that fact that gold was a
bit oversold earlier and we are having a nice solid bounce in
equities. I think that's also helping gold," said Peter
Buchanan, senior economist at CIBC World Markets in Toronto.
"With daily momentum oscillators posting their first
oversold readings since March, we look for renewed signs of
basing ahead of resumption of the cyclical bull trend, which is
still very much intact," Barclays Capital said in a note.
"Bulls need to regain the 21-day averages at 997/1,231 (in
euro and dollar terms, respectively) to regain control."
Buchanan said the positive correlation between equity and
gold markets had been resurrected and was supporting gold,
adding that the euro's renewed strength on the dollar also
helped lift prices in late trade.
U.S. stock markets rallied on Wednesday, rebounding from
recent losses, as a bullish earnings forecast for State Street
Corp fueled optimism about the upcoming earnings season. []
The euro rose against the dollar in technical trading after
breaking a resistance level that prompted some investors who
had bet against the single currency to buy the euro back in
effort to prevent losses. []
Although the usual inverse link between gold and the dollar
weakened earlier this year as both benefited from risk
aversion, a stronger U.S. currency usually makes dollar-priced
metals more expensive for holders of other currencies.
Gold's refound strength was tentative at first, with
concerns about the global economic outlook drawing some
investors to the yellow metal as a safety play.
Because the safe-haven bet had been built into prices on
their way to record highs, it had a lesser effect in
Wednesday's rally.
"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 Wolfgang Wrzesniok-Rossbach, head of sales at Heraeus.
Gold had fallen some 6 percent from its peak at $1,264.90
an ounce hit in late June.
In India, the world's biggest gold consumer, jewelers
bought stocks ahead of religious festivals, and other physical
buyers in Asia snapped up bullion after prices fell. []
CHINA MULLED
Gold earlier slipped to a session low of $1,185.05, its
weakest since late May, in earlier trade after China's State
Administration of Foreign Exchange said gold will not become a
major component of the central bank's portfolio.
[]
However, analysts said, given the size of China's currency
reserves, it was not surprising gold would play only a
relatively minor role in its portfolio, and that the news was
unlikely to detract from central bank interest in gold if
prices fell.
"China has $2 trillion in currency reserves, so it is
simply not possible for them to invest a major part of this in
gold. The gold isn't there," said Commerzbank analyst Daniel
Briesemann.
In New York, holdings of the world's largest gold-backed
exchange-traded fund, New York's SPDR Gold Trust <GLD>, dipped
further on Tuesday to 1,316.481 tonnes. []
The SPDR's holdings have fallen 3.955 tonnes from a record
1,320.436 tonnes at the end of June, against a rise of 18.429
tonnes in the same period of the previous month.
Spot silver <XAG=> had rallied to $18.02 an ounce the New
York afternoon from $17.78 an ounce late in the previous
session. It tied its fate to gold on Wednesday.
Platinum <XPT=> increased to $1,521.50 an ounce from
$1,512.50 an ounce late Tuesday, and palladium <XPD=> was
higher at $440.0 an ounce than $435.0 previously.
Prices at 2:11 p.m. EDT (1657 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCQ0> 1198.90 3.80 0.3% 9.4%
US silver <SIU0> 18.000 0.143 0.0% 6.9%
US platinum <PLV0> 1526.40 7.70 0.5% 3.8%
US palladium <PAU0> 442.35 1.95 0.4% 8.2%
Gold <XAU=> 1201.65 10.15 0.9% 9.6%
Silver <XAG=> 18.03 0.25 1.4% 7.1%
Platinum <XPT=> 1521.00 8.50 0.6% 3.8%
Palladium <XPD=> 440.00 5.00 1.1% 8.5%
Gold Fix <XAUFIX=> 1193.25 7.25 0.6% 8.1%
Silver Fix <XAGFIX=> 17.65 -20.00 -1.1% 3.9%
Platinum Fix <XPTFIX=> 1512.00 9.00 0.6% 3.1%
Palladium Fix <XPDFIX=> 439.00 6.00 1.4% 9.2%
(Additional reporting by Jan Harvey and Pratima Desai in
London; Editing by Walter Bagley)
