Gold gains as equity marts rebound

Gold gained little as Asian equities rose for a second day, rebounding from a global sell-off that erased $3.3 trillion in market value and triggered selling in metals and other commodities to cover losses and reduce risks.

Gold, which dropped 7.3 per cent last week after reaching a nine-month high of $688.64 on February 27, rose 1.6 per cent yesterday as investors closed short, or sell, positions amid signs that equities had started to recover and on speculation that losses in the precious metal had been overdone.

"A rebound in Asian and US shares prompted short covering, encouraging physical buyers and bargain hunters into the market," analysts from Investec Bank (Australia) said in a note to clients today. "However, expectations are that the recent volatility would continue until stock markets stabilise," they added.

Gold for immediate delivery rose as much as $2.13, or 0.3 per cent, to $648.63 an ounce and traded at $644.80 (4:31 pm Sydney time), extending the metal's $9.90 gain yesterday.

"Our expectations would be a sell-off tonight to $640 and then from there I would love to buy it,'' Jonathan Barratt, managing director of Commodity Broking Services in Sydney, said by phone today.

US stocks broke a week-long slump yesterday and posted their biggest gains since July. The Standard & Poor's 500 Index added 21.29, or 1.6 per cent, to 1,395.41.

The Dow Jones Industrial Average climbed 157.18, or 1.3 per cent, to 12,207.59. It was the steepest advance for both measures since July 24.

The Morgan Stanley Capital International Asia-Pacific Index advanced 0.2 per cent to 141.14 at 4:28 p.m. in Sydney. The gauge yesterday climbed 1.8 per cent, its first gain since a sell-off began on February 27.

On the Tokyo Commodity Exchange gold for delivery in February 2008 fell 4 yen to 2,432 yen a gram ($649 an ounce) at 4:32 pm Sydney time. Gold in Tokyo rose yesterday, snapping five days of falls.

"Gold-yen is reaching that low and you would probably expect to see a little bit of a bounce in it and you might start to get a little bit of investor support at the current level," Barratt said. "I would tend to think that is not a bad play." New figures from the US Energy Department on inventories of gasoline and distillate fuel, including crude-oil stockpiles, are due out later today.

Gasoline inventories probably fell 1.5 million barrels from 220.2 million last week, according to the median of forecasts by 15 analysts surveyed by Bloomberg.

"If we get some numbers suggesting crude inventories are on a drawdown again then we could see gold regain itself back up to that important psychological $650 level," Barratt said.

The price of crude, which usually moves in tandem with the price of gold, was little changed near $61 barrel today after earlier rising on signs that colder weather in the US Northeast will boost demand for heating oil. Yesterday, oil rose 62 cents, or 1 per cent, to close at $60.69 a barrel.

Gold futures for April delivery rose as much as $4.50, or 0.7 per cent, to $650.70 an ounce and traded at $646.10 (4:34 pm Sydney time) in electronic trading on the Comex division of the New York Mercantile Exchange. The contract rose 1.1 per cent yesterday.

Silver for immediate delivery fell 2 cents, or 0.1 per cent, to $12.88 an ounce (3:00 pm in Sydney).

Platinum fell $9.75 to $1,183.50 an ounce, while palladium was unchanged at $348 an ounce. A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date.