Gold prices go higher

Gold edged higher on Wednesday, recovering from a 2.5 percent fall the previous day as the market reassessed a surprise rate hike by China.

China’s central bank raised rates for the first time in nearly three years, a move that could mark the start of a more aggressive phase of monetary tightening in the world’s fastest-growing major economy.

The dollar soared on the news, but slipped against a basket of currencies on Wednesday, bolstering gold.

“We are seeing a little bit of bargain hunting. The market has not really seen a turnaround, even though there are talks of correction,” said Ronald Leung, a physical dealer at Lee Cheong Gold Dealers in Hong Kong.

Policy changes in the United States are likely to remain the most closely watched factor in the market.

“So long as the U.S. interest rate stays on the low end, and China’s interest rate doesn’t rise too quickly, the market still has a chance to move higher,” said Leung.

Spot gold gained nearly 0.3 percent to $1,340 an ounce by 0515 GMT. It fell to a two-week low of $1,334.45 on Tuesday, dropping by its most since early July and more than $50 below an all-time high of $1,387.10 hit last week.

The most-active gold futures contract on the Shanghai Futures Exchange lost more than 2 percent to 287.15 yuan a gram.

“In the short term, gold will be under pressure, as investors switch over to the dollar from commodities,” said Hou Xinqiang, an analyst at Jinrui Futures in China.

“For gold, we might see a correction taking prices down to as low as $1,300.”

Holdings in the SPDR Gold Trust dropped less than one metric ton to a one-week low of 1,300.089 metric tons.

Spot silver gained 1.8 percent to $23.73 an ounce, after tumbling 4.2 percent in the previous session.

Source: Reuters