SINGAPORE - Gold regained some strength on Thursday after falling to its lowest in nearly two weeks the previous day, although poor technicals and failure to sustain recent gains may spur selling, traders said.
Bullion has seen a series of corrections since striking a lifetime high above $1 200/oz last December. Although it has rebounded from a three-month low around $1 043 in February, a build-up in long positions in New York futures has now threatened to cap any gains.
Spot gold was at $1 108,75/oz by 05:58 GMT, up 90 c from New York's notional close on Wednesday, when it fell to as low as $1 102,85/oz, its lowest level since February 25, as safe-haven buying on Greek sovereign debt worries tapered off.
Gold rose above the 50-day moving average on Thursday as bargain hunters resurfaced but it remained below the 100-day moving average, with strong Chinese inflation data triggering worries about further monetary tightening.
The world's largest gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings stood at 1 115,511 t by March 10, down 0,609 t from the previous business day.
"We have seen investors withdraw holdings in the SPDR ETF, which has stalled the upward trend seen since the end of February," said Standard Chartered commodity strategist David Barclay.
"The stronger than expected CPI numbers out of China this morning raise the prospect of a 27 (basis point) rate hike by end-Q1, which would move policy further away from a super-loose stance to a more accommodative one.
"This could weigh on commodities markets in the near term, which would be bearish for gold."
Chinese consumer inflation spurted to a 16-month high in February and a raft of economic data displayed broad-based strength, providing fresh arguments for policy tightening sooner rather than later.
US gold futures for April delivery hardly changed at $1 108,8/oz, having ended 1,3% lower on Wednesday.
The latest Commitment of Traders report by the US Commodity Futures Trading Commission showed net long noncommercial gold futures positions at 207 372 contracts, up 3,4% from the prior week and up 14% during the last four weeks.
"We've see a little bit of buying but the market comes off after it reaches $1 111. I think the concern now is whether China is going to raise interest rates, then it will affect sentiment in commodities," said a dealer in Hong Kong.
Palladium fell more than 2% as speculators booked profits from last week's rally to 2-year highs, while platinum slipped from a 7-week high hit on Wednesday.
In other markets, the euro edged down to $1 3646, having risen 0,4% on Wednesday. Oil fell below $82 on Thursday, pulling prices from an eight-week high a day ago on expectations for OPEC members to keep pumping crude above quotas in the second quarter.
Singapore Commodity Exchange (SICOM), a unit of Singapore Exchange (SGX), said it will start trading of its new gold deferred settlement contract on March 30.
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