Gold rebounds

Spot gold rebounded on Thursday from sharp falls in the previous session on short-covering and a weak dollar, but prices were still near 2-1/2 month lows as worries about the eurozone debt crisis kept investors cautious. The precious metal has lost 9 percent of its value this month, putting it on track for its first monthly fall since September and its weakest December since 2008, when the global credit crunch was at its worst.
Although gold is regarded as a safe haven that can shield investors in times of uncertainty, it has increasingly become prone to pressure from the wider financial markets, moving more in tandem with other assets as investor sentiment remains fragile.
Spot gold rose 0.7 percent to $1,585.38 ounce at 1415 GMT following its biggest one-day decline in nearly three months on Wednesday on pessimism about the eurozone and liquidation by funds. It hit a session low of $1,564.14, close to a 2-1/2 month low of $1,564.05 touched a day earlier.
US gold rose 0.1 percent to $1,587.90 an ounce. "With the sharp falls we have seen (yesterday), there is a bit of short-covering. The strength of the bounce, however, has been rather modest, because the gold market tends to quieten down quite rapidly from the beginning of December," Ross Norman of Sharps Pixley said. The euro rebounded to hit a global session high against the dollar. A weak US currency tends to boost commodities priced in dollars. Prices are prone to volatile moves at the end of the year on thinning liquidity as many investors close their books for the year and move to the sidelines, waiting for a fresh start in January.
Prices broke below the 200-day moving average in the previous session, seen as a bearish signal for the market, but technical analysts said it might be too early to suggest the bull trend was over. The relative strength index on spot gold remained below 30, for a second session in a row, indicating an oversold market, which could attract some buying. Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, were unchanged at 1,294.796 tonnes by December 14, even while prices fell.
"Investors with a medium- and long-term view are remaining loyal to gold, and gold ETFs are still showing no outflows. In our view, bargain hunters are soon likely to take advantage of the low price levels," Commerzbank analysts said in a note. Spot silver dropped to $28.10, its lowest since late September, before rebounding to trade at $29.05. The metal has fallen about 10 percent so far this week, pushing the year-to-date performance into the red.
"Silver's rally this year was driven by strong investment demand building upon relatively healthy industrial consumption," Barcap analysts said in a note. "However, the industrial outlook for the metal has weakened and investor interest has turned negative in a market in fundamental surplus, exposing prices to the downside." Spot platinum tumbled as much as 3.2 percent to a two-year low of $1,372, before trimming some losses to trade at $1,410.55. Palladium rose 0.8 percent to $618.73an ounce.