Gold rebounds from 3-month lows as US dollar eases

[BENGALURU] Gold rose on Wednesday, bouncing back from hitting its lowest in more than three months in the previous session, as the US dollar eased back from a two-month high and stocks fell.

Spot gold was up half a per cent at US$1,273.40 an ounce by 0349 GMT, after dropping more than 3 per cent on Tuesday to its lowest since June 24.

US gold futures rose 0.5 per cent to US$1,275.90 an ounce, after also falling more than 3 per cent on Tuesday.

"Tuesday's fall was really a long liquidation and was probably over done. If the non-farm payroll data this week is too good, then we might try another low," said Yuichi Ikemizu, head of commodity trading at Standard Bank in Tokyo.

"Still, US$1,250 would be a good support. I don't really expect gold to go much lower from here and we could see steady buy back toward US$1,300 levels," Mr Ikemizu said.

The drop on Tuesday was bullion's biggest one-day percentage drop since September 2013 and brought spot gold to its lowest level since Britain voted to leave the European Union in June.

"The market is clearly very long and someone started testing the US$1,300 levels, and there were more stops than buys," a Hong Kong-based trader said.

The absence of China for a week-long holiday robbed the market of buyers who might have looked for bargains, the trader said.

Spot gold may edge up to US$1,276 per ounce to complete a short-lived bounce before resuming its downtrend towards US$1,260, said Reuters technical analyst Wang Tao.

Bloomberg reported on Tuesday that the European Central Bank would likely gradually wind down US$90 billion in monthly bond purchases before ending its quantitative easing programme, citing unnamed officials at euro zone central banks.

"The ECB news added fuel to the fire because if the ECB is thinking about tapering, then the path for gold is lower," said Amit Kumar, research head at Adroit Financial Services.

"Easy money taken away is always gold negative," he said.

Later, an ECB media officer tweeted that the central bank's decision-making body has not discussed reducing the pace of its monthly bond buying.

The dollar index, which measures the greenback against a basket of six major currencies, slipped 0.2 per cent on Wednesday.

Asian shares also edged lower on Wednesday and bond yields were near two-week highs.

Among other precious metals, silver edged up nearly 1 per cent, after falling 5 per cent the prior day in its biggest one-day drop since January 2015.

Platinum gained 1 per cent to US$990.60 an ounce, after touching its lowest in more than three months on Tuesday.

Palladium was up 0.3 per cent.

REUTERS