NEW YORK/LONDON: Gold traded flat on Tuesday, halting a two-day drop brought about by euro zone debt jitters, as a Wall Street rally lifted the metal off lows hit earlier in the session.
Bullion, which has taken to follow equities, rose nearly $20 from its initial nadir after a slew of encouraging US corporate results led by Goldman Sachs Group Inc fuelled a 200-point jump in the Dow.
The metal had lost 2 percent in the previous two sessions as markets broadly weakened on worries that Spain, one of the euro zone's largest economies, might soon struggle to repay its debt.
Renewed European debt fears, however, could boost gold's safe-haven appeal and break the positive link between the metal and riskier assets, analysts said.
"We expect that if European credit conditions continue to deteriorate, gold (along with the dollar) could start to better reflect the growing tensions by moving higher," said Edward Meir, metals analyst at INTC FCStone.
Spot gold was down 50 cents at $1,651.10 an ounce by 1:02 p.m. EST (1702 GMT), sharply off an earlier low of $1,634.44.
US gold futures for June delivery rose $2.40 to $1,652 an ounce.
While concerns about chaotic defaults among peripheral euro zone economies supported gold as a safe haven last year, a brighter US economic outlook and diminished hopes of further US monetary easing have recently pressured the metal.
PHYSICAL DEMAND LAGGING
Physical gold demand has softened a touch this year from last year's levels. American Eagle gold coin sales from the US Mint fell 30 percent in the first quarter, and demand in India, historically the world's biggest gold consumer, has been light.
India's central bank cut interest rates on Tuesday for the first time in three years by an unexpectedly sharp 50 basis points. If this stimulates economic growth, it is likely to prompt more gold buying.
Among other precious metals, silver was up 0.9 percent at $31.72 an ounce, spot platinum edged up 0.6 percent at $1,577.74 an ounce and spot palladium rose 1.6 percent to $658.72 an ounce.
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