London gold bounces from three-month low

Gold bounced back on Thursday after hitting three-month lows the previous day, but analysts were awaiting the outcome of a two-day Federal Reserve meeting that should steer financial markets in the short term.
Traders said gold was helped by a weaker dollar against the euro and firmer oil prices. Physical buyers and bargain hunters also stepped into the market to take advantage of lower prices.
Gold rose as high as $648.95 an ounce before easing to $647.10/648.40 an ounce as of 1418 GMT, versus $642.50/644.00 in New York late on Wednesday, when it fell as low as $638.90.
"It's part technical, part currencies and part physical demand out of Asia," a European metals analyst said, pointing out reasons for gold's recovery. "The market as a whole still wants to be bullish. There is a belief that the trend is still up."
Gold, traditionally seen as a haven for investors, has more recently been put in the same category as other commodities, which are considered riskier investments.
Analysts said the US Federal Reserve's post policy-setting meeting statement later in the day, which should give clues about the future path of US monetary policy, would be the main price driver.
The dollar fell slightly against the euro ahead of the outcome of the meeting. A metals traders in London said $648 was a key point to get through and gold rose beyond the level on the back of stronger crude oil prices and further short covering.
"The $652-$654 area is important for us and the market will not turn until we get over these resistance points." "Should (Fed chairman) Bernanke hint that inflation is still a concern then I suspect gold will be put back under pressure," James Moore, analyst at TheBullionDesk.com, said in a note.
Normally, higher inflation is bullish for gold, but when accompanied by tighter monetary policy and so higher interest rates, it increases the opportunity cost to investors of holding zero-yielding bullion.
Traders were also keeping an eye on the price of crude oil, which can trigger moves in gold. London Brent crude was slightly up at $70.67 a barrel.
Analysts who follow historical price charts said the recent heavy sell-offs in gold and silver had left both markets vulnerable to further sharp declines and may have delayed their return to a longer-term bullish trend.
"The moves that we have seen over the past couple of days have resulted in a chart picture deteriorating quite a bit," Karen Jones, head of technical analysis at Commerzbank, said.
Silver, which fell to its lowest in five months on Wednesday, also stabilised in line with gold. Prices gained to $12.42/12.46 an ounce from New York's previous $12.26/12.29. Platinum moved up to $1,273/1,277, recovering from a low of $1,259.50 an ounce marked the previous session. It was at $1,266.10/1,273.10 in late New York. Spot palladium was at $364.45/368.45 an ounce, compared with $360.75/364.75.