Gold edges up as buyers slowly return after sell-off
Gold edged higher on Friday as buyers slowly returned to the market, lured by Wednesday's plunge of 5%, although bullion is still heading for its worst weekly performance since December.
US Federal Reserve Chairman Ben Bernanke's lack of a reference to further quantitative easing at congressional testimony on Wednesday sparked a heavy sell-off in bullion, sending the metal to a one-month low short of $1,700.
Gold's fall to the lower end of its previous range showed the lack of conviction required to push prices above $1,800 or higher, but analysts and traders saw Wednesday's plunge as a healthy correction rather than the end of the bull run.
"The broader macro backdrop remains gold-favourable, given the negative interest rate environment, longer-term inflationary concerns and lingering sovereign debt uncertainties," Barclays Capital said in a research note.
But dollar strength, broad risk reduction and profit-taking could pose near-term hurdles for gold, it added.
Spot gold inched up 0.2% to $1,720.39 an ounce by 0518 GMT, but was still on course for a weekly decline of 3.4%, its biggest one-week fall since mid-December.
US gold was little changed at $1,721.90.
Technical analysis suggested that spot gold could face resistance at $1,726 during the day, said Reuters market analyst Wang Tao.
Holdings in gold-backed exchange-traded funds gained 238,674 ounces to a record high of 70.76 million ounces, suggesting investors remained keen on gold.
Gold-Platinum Spread Collapses Towards Parity
The gold-platinum spread fell to just about $15 an ounce, its lowest since mid-September, as supply disruption in South Africa remains a concern, and upbeat US auto sales data helped.
Spot platinum gained 0.6% to $35.35 an ounce, headed for a loss of 0.2% over the week. The metal, mainly used to produce jewellery and autocatalysts, has risen 22% so far this year, versus gold's gain of 10%.
"I'm of the opinion that gold's premium over platinum should be corrected in due time, but I didn't expect it to come so quickly," said Yuichi Ikemizu, head of commodity trading, Japan, at Standard Bank.
The focus remains on Impala Platinum, the world's second-largest platinum producer, which has suffered 100,000 ounces of lost production in a six-week-long strike at its key Rustenburg mine. The company said it would restart production on March 5.