Gold up on bargain hunting, platinum climbs

Analysis

Gold rose 1% in Europe on Wednesday as investors took advantage of a three-day fall in prices to buy below the key $900 an ounce support level.

Platinum also recovered after a sharp dip, which saw the white metal shed more than 10% in three sessions, as Xstrata’s $10 billion bid for Lonmin boosted confidence in the market and a strike began in major producer South Africa. Gold rose to $883.80/884.80 an ounce at 1014 GMT from $876.35/877.95 late in New York on Tuesday. “Clearly there is some opportunistic buying going on at the moment,” said Daniel Hynes, metals strategist at Merrill Lynch. “We have seen numerous times over the past six months that $900 an ounce is a key support level, and whenever gold has fallen below that it has recovered relatively quickly.”

The dollar retreated from seven-week highs against the euro after the Federal Reserve intimated, after leaving interest rates on hold at 2% late Tuesday, that it is in no hurry to hike rates. A softer dollar will ease downward pressure on gold, which is often bought as a hedge against weakness in the currency.

Gold slipped more than $20 an ounce on Wednesday as part of a broader sell-off of commodities, led by crude oil. There are signs that investment demand may be softening. The largest gold-backed exchange traded fund, New York’s SPDR Gold Trust GLD, said its gold holdings fell 15 tons or 2.3% on Tuesday to a one-month low of 659.31 tons. The fund’s gold holdings are now nearly 7% below their all-time peak above 700 tons on July 21.

 
PLATINUM REBOUNDS

Platinum prices rebounded, helped by Anglo-Swiss miner Xstrata’s $10 billion bid for the world’s third biggest platinum producer, Lonmin. Platinum rose more than 3%, and palladium 5%, as traders saw the bid as a vote of confidence in the future of the platinum market. “Platinum has been buoyed by interest in the sector (linked to) Xstrata’s bid for Lonmin,” said Commerzbank trader Rory McVeigh. “It shows a more positive view of the platinum situation in South Africa.”

Meanwhile a one-day strike started in South Africa, source of four out of five ounces of the world’s platinum. Anglo Platinum, the world’s top producer of the precious metal, said some of its mines and a smelter had been affected by the strike.

Gold producers Harmony, Anglogold Ashanti and Gold Fields all said their production had been hit. Daniel Hynes said the disruptions would normally have been much more supportive for platinum, but that the negative demand outlook from the automotive sector was capping any gains. He added, however: “The strike, and Xstrata’s bid for Lonmin this morning, does suggest that there are still a lot of people who think the platinum market has a lot better times ahead.”

Spot platinum hit a high of $1,615.50 ounce before easing to trade at $1,611.00/1,631.00 against $1,563.00/1,583.00 late in New York on Tuesday. Spot palladium rose to a session high of $371.00/385.00 an ounce from $346.00/354.00 in New York. Silver climbed to $16.64/16.70 an ounce from $16.45/16.53 late in New York. (Reuters)

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