Spot gold was bid at $912.50 an ounce at 1417 GMT, against $908.45 an ounce late in New York on Wednesday. U.S. gold futures for August delivery on the COMEX division of the New York Mercantile Exchange rose $3.50 to $912.80 an ounce.

Gold sold off on Wednesday in line with other commodities, slipping to an eight-week low, after the U.S. Commodity Futures Trading Commission said it was considering a clampdown on excessive speculation in commodities.

Afshin Nabavi, head of trading at MKS Finance in Geneva, said the slip was met with some light physical buying in the Far East and Europe.

“We saw some small demand out of the Far East this morning,” he said. “But India and the Middle East is still very quiet.”

“Also, the U.S. dollar is a bit weaker today,” he added.

The dollar gave back some of the previous session’s gains on Thursday as equities firmed in Europe and U.S. stock futures rose, denting interest in the currency as a haven from risk.

A recovery in stock markets after a five-day losing streak, gains in industrial commodities such as oil and base metals and a less cautious tone to currency markets suggested recent sessions’ heavy risk aversion may be abating.

Oil’s tick higher also helped support gold, which can be bought as a hedge against oil-led inflation.

Demand for gold investment products such as exchange-traded funds — a major support of prices earlier in the year amid volatility in other markets — remained sluggish, however.

Holdings of the world’s largest gold ETF, the SPDR Gold Trust , declined more than 10 tonnes on Wednesday, while those of ETF Securities’ ETFS Physical Gold product slipped 12,500 ounces 0.4 percent.

OUTPUT FALLS

In supply news, South Africa, the world’s third largest gold miner after China and the United States, said its output of the metal fell 10.5 percent in May from a year ago.

Among other precious metals, platinum was at $1,104.50 an ounce against $1,096, while palladium was at $235 against $231.50. Both metals are primarily used in car manufacturing as a component in catalytic converters.

Traders of palladium in particular were cheering news from China that its passenger car sales rose 47.7 percent in June from a year earlier.

Chinese cars are usually petrol-fuelled, meaning they use a higher proportion of palladium than platinum, which is a primary component in diesel catalysts.

Dealers say as palladium is still relatively expensive, it is unlikely to immediately post significant new gains, although platinum has met some interest.

“Even though there is very little obvious buying taking place right now, platinum is still managing to hold its head above $1,100,” said one analyst, adding strong turnover in Shanghai suggests good Chinese buying at these levels.

Elsewhere silver was at $12.85 an ounce against $12.84.

LONDON, July 9 (Reuters)

Gold swung into the black on Tuesday, rising more than 2 percent to a one-week high of $855.75 an ounce, amid market talk of a large order.

Firm investment demand for gold as a haven from risk is fueling buying of the precious metal, analysts said.

Spot gold was quoted at $853.00/855.00 an ounce at 1228 GMT, up from $834.55 late on Monday. Earlier it touched a low of $822.90, down more than 1 percent.

Standard Chartered analyst Daniel Smith said strong investor flows into products such as exchange-traded funds as investors sought more secure assets were offsetting weaker jewelery demand.

“People are slowly building long positions in gold and commodities more generally,” he said.

Gold managed shrugged off early weakness linked to a strengthening U.S. dollar and weaker oil prices.

The dollar rose to a six-week high against the euro as traders worried about the outlook for the euro zone economy, after the European Commission issued a grim forecast for 2009 and Standard and Poor’s cut Spain’s debt ratings.

A stronger dollar tends to pressure gold, which is often bought as an alternative investment to the U.S. currency.

“With financial institutions struggling in Europe and euro zone government bond spreads widening, weak economic data could see the euro lose ground against the dollar,” noted Standard Bank analyst Walter de Wet.

In Germany, data showed the Mannheim-based ZEW economic think tank’s monthly poll of economic sentiment rose to -31.0 from -45.2 in December.

The other main external driver of gold, crude oil, tumbled almost 10 percent, after Russia and Ukraine agreed on a gas deal that will help secure supplies to Europe and as traders worried over the outlook for demand.

Gold tends to move in line with crude, as it is often used as a hedge against oil-led inflation. Moves in the oil price are also an indicator of interest in commodities as an asset class.

Markets are awaiting the inauguration of new U.S. president Barack Obama. Obama is due to take the oath of office at 1700 GMT.

JEWELERY DEMAND WEAK

Overall, fears over the outlook for the global economy and the financial system are boosting interest in products like exchange-traded funds — which issue securities backed by actual stocks of gold. These are seen as less risky than paper assets.

The world’s largest gold-backed ETF, New York’s SPDR Gold Trust, said its holdings are at a record 795.25 tonnes.

However, demand for consumer products such as gold jewellery is suffering from relatively high gold prices. Jewelery demand in the world’s largest bullion market, India, slowed on Tuesday as buyers waited for prices to fall.

Demand may pick up if prices move below 12,500 rupees locally and $800 on the international markets, Mayank Khemka, managing director of Khemka International in Delhi, said.

Among other precious metals, platinum weakened a touch to $942.50/947.50 an ounce, against $948.50 late on Monday.

Prices have remained in a relatively narrow range below $1,000 an ounce as traders continue to fret about the demand outlook as the economy slows.

Platinum has shed some 60 percent of its value since it hit an all-time high of $2,290 an ounce last March on fears over falling consumption by car makers, who account for around half of global demand for the metal.

Prospects for the economy, and the automotive sector in particular, “remain very worrying” for platinum, Societe Generale said in a weekly report.

Palladium was quoted at $181.50/186.50 an ounce against $183 late on Monday, while silver fell to $11.29/11.36 an ounce from $11.13.

LONDON, Jan 20 (Reuters)

Gold fell more than 2 percent on Tuesday as a stronger dollar dented the precious metal’s appeal as a currency hedge, but the platinum group metals rallied as investors hunted for bargains.

Spot gold was quoted at $846.50/848.10 an ounce at 1444 GMT, down from $858.90 late in New York on Monday. However, it lifted off an earlier low of $838.55 as the dollar trimmed gains against the euro after a raft of U.S. data at 1500 GMT.

U.S. gold futures for February delivery on the COMEX division of the New York Mercantile Exchange were down $10.10 at $847.70.

VM Group analyst Matthew Turner said investors were looking to the currency markets for direction. “A lot of news on physical demand has been quite poor, and that might also be weighing on prices,” he added.

The U.S. currency rose against the euro after a flash estimate of euro zone inflation data came in weaker than expected, increasing pressure on the European Central Bank to cut interest rates.

Analysts said the prospect of an ECB rate cut at the bank’s next interest rate meeting on Jan. 15 was pressuring the single currency, and consequently gold.

A firm dollar reduces gold’s appeal as an alternative investment. However, the U.S. currency trimmed gains versus the euro after data showed U.S factory orders and pending home sales dropped by more than expected in November.

DEMAND FIRM FROM FUNDS

But while the stronger dollar and reports of lackluster jewelery sales weighed on prices, demand for the metal from exchange-traded funds — which issue securities backed by stocks of physical gold — remains firm.

ETF Securities, which operates Europe’s largest gold-backed ETF, said holdings of its Physical Gold exchange-traded commodity rose 2 percent in the week to January 2 to 1.899 million ounces.

Holdings of the world’s largest bullion ETF, the SPDR Gold Trust (GLD), held at a record 780.23 tonnes on Monday.

“Gold is holding (where it is) because of investment demand for gold ETFs, rather than demand from the physical side or as a hedge against the U.S. dollar,” said Commerzbank analyst Eugen Weinberg.

Firmer oil prices, which are holding just below $50 a barrel as supply fears were fuelled by Israel’s incursion into Gaza and a dispute between Russia and Ukraine over natural gas, also lent some support to gold.

Among other precious metals, platinum and palladium rallied to multi-week highs, shrugging off a spate of poor vehicle sales news from car makers, the major consumers of the metals.

Spot palladium was the main riser, climbing 8 percent to a six-week high of $198.50. The metal was later quoted at $194.50/199.50, against $183.50 late in New York on Monday.

Platinum also climbed more than 2 percent to $967.50, its highest level for three months. It was later at $958.50/963.50 an ounce against $946.

“With the commodities basket, people are shifting out of gold and into other commodities that have been under performing lately,” said Commerzbank trader Rory McVeigh. “And palladium is probably the biggest underperformer of the market.”

Spot silver eased to $11.11/11.19 an ounce from $11.22.

LONDON, Jan 6 (Reuters)

It is an interesting time for gold investors. On one hand, gold prices should be soaring as investors flee to the precious metal for security. On the other, gold’s value should be dropping precipitously as deflationary concerns gain momentum.

It is no wonder gold prices remain horizontal and the gold hedge I recently created is paying profits. Last week we cashed in for gains of up to 50%.

Some interesting reports released today will help illustrate why gold prices are acting the way they are.

First, let’s look at the demand side of the equation. Global orders for gold increased by over 120% during the third quarter on a year-over-year basis. Retail investors moved 232 tons of the metal, compared to 105 tons this time last year.

Exchange-traded funds (ETFs) significantly boosted their physical possession of gold over the past three months. Third-quarter holdings increased by 150 tons. During the second quarter of the year, they only added 4 tons of gold.

These figures are proof that global demand is soaring. But why are prices staying flat and showing signs of a serious collapse?

They want it, but we don’t

There are two answers.  For the first, we have to look at the situation here in the States. During the previous quarter, Americans demanded 20% less gold than the same period a year ago. Thanks to a strengthening dollar, American investors are shying away from gold as it typically moves inversely to the greenback.

Remember, gold is a vehicle used to protect against inflation. Right now, the American economy is anything but inflationary. The headline reading of the latest producer price index, released yesterday, showed a record 2.8% decline in wholesale prices last month. Today’s consumer index confirms the deflationary environment with a negative reading of one percent.

Deflating prices will be a major drag on gold’s appreciation. Enough American investors will be dumping their gold holdings in exchange for stronger assets to nearly offset the significant increase in global demand.

If a deflating economy is not enough to drag gold valuations down, the fact that institutional investors are abandoning the metal certainly will. The world’s largest funds unloaded 300 tons of gold recently. As they are forced to meet margin calls or as their investors cash out, institutional investors are unloading their gold holdings as the metal is liquid and, compared to their other holdings, has held much of its value.

By reviewing this information, it is easy to see why gold prices have made relatively little moves over the past three months. When prices get pulled in both directions, they tend to stay put.

Something’s gotta give

Eventually one of the forces will give and gold valuations will make a significant move. If the break is caused by a slowdown in global demand thanks to signs of economic recovery, gold prices will plunge. If it institutional sellers stop unloading while global demand is at record levels, prices will soar.

History and basic economic principles point towards falling prices so I am naturally bearish on gold’s long-term valuation. But there are plenty of folks that tell me I am wrong. As the world economy tanks and the U.S. floods the market with its currency, they say, gold price will soar.

Never one to invest unprotected, I created a hedge play that will profit no matter which way valuations move over the next year. If I am right, the bearish leg of the hedge will win. (Last week we proved my theory by cashing in gains of over 50%). And if I am wrong, the bullish side will win. No matter what, the hedge is designed to pay out profits.

If you want to learn about this unique hedge, click here.

This is an interesting time for investors. Never before have so many unique, yet infinitely strong forces, tugged at the market.

As we slowly weigh and understand all of the variables, the economic future will become clear. But for now, it is prudent to take protection and seek shelter in the opportunities that have historically provided profitable recessionary havens.

Source: The gold dichotomy: Demand rises, prices fall