* Falling stocks, sovereign debt worries support
* Low U.S., ECB rate outlooks seen positive
* Analysts eye $1,300 psychological level
(Updates prices)
By Amanda Cooper and Veronica Brown
LONDON, June 24 (Reuters) - Gold rose on Thursday,
recovering from an earlier slide as a less optimistic growth
outlook from the U.S. Federal Reserve undermined equities and
boosted perceived safe havens.
Spot gold <XAU=> was bid at $1,242.35 an ounce by 1455 GMT,
versus $1,235.20 late in New York on Wednesday, having hit an
earlier intraday low of $1,227.75. U.S. August gold futures were
last up $8.80 at $1,243.80 <GCQ0>.
Having hit a record $1,264.90 early this week, prices have
struggled to make further upward headway, which has left the
market prone to short-term setbacks.
Gold came under pressure earlier as it reestablished its
traditional inverse correlation with the dollar <.DXY>, although
this relationship broke down in the afternoon session in Europe
as waning risk appetite lifted both bullion and the U.S.
currency.
Stock markets fell after the Federal Reserve acknowledged a
faltering pace of U.S. economic recovery on Wednesday as it
renewed a vow to hold benchmark interest rates exceptionally low
for an extended period. []
The unfolding sovereign debt crisis in Europe remained in
focus as index-linked fund managers ditched Greek government
bonds, widening the spread between Greek yields and other
benchmarks and increasing the cost of insuring Greek government
debt against default. []
"We've identified this as being the primary support for gold
prices this week," said Nic Brown, senior analyst at Natixis.
"It's a central theme and a lot of what we've said about
gold is that the credit problems on the sovereign side are the
main driving force behind the rise in gold right now" he said.
A drop in weekly U.S. initial jobless claims and a rise in
big-ticket manufactured goods offered some hope that the fragile
economic recovery remained intact but did not change the
market's perception that U.S. rates would not rise anytime soon.
[]
"Low interest rates are generally good news for precious
metals. We believe that the Fed and the ECB (European Central
Bank) will remain on hold for quite some time because of the
European debt problems," said Tobias Merath, an analyst at
Credit Suisse.
Technical analysts were positive on the market's ability to
breach new highs, despite its current lack of traction.
"Spot gold maintains a target of $1,300 ... $1,308.02 is an
additional upside target en-route to the more significant
$1,350/1,392.70 resistance area," Commerzbank said in a note to
clients.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
For a graphic on the spot gold technical outlook, see:
http://link.reuters.com/byp73m
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
IN STEP WITH DOLLAR
Merath of Credit Suisse noted that after a sustained period
during which prices moved up in line with the dollar as Europe's
mounting debt problems spiralled, markets are beginning to show
some signs of returning to more normal conditions.
Dollar funding costs are stabilising, while the euro has
also recovered some poise after its recent battering to
multi-year lows <EUR=>.
"We have seen austerity packages launched in Europe and
market conditions seem to be starting to normalise, while other
commodity prices also seem to have found support. We think the
focus is shifting away from safe havens and towards monetary
policy," he said.
"Overall the uptrend is still there. The market is slowly
creeping higher with a few setbacks still there. But what we
have is a series of higher highs and higher lows," he added.
On the investment front, the world's largest gold-backed
exchange-traded fund, SPDR Gold Trust <GLD.P>, said its holdings
stood at 1,313.135 tonnes as of June 23, unchanged from a record
marked the previous business day. []
In other precious metals, platinum <XPT=> was down at
$1,554.00 an ounce, versus $1,566.00 on Wednesday, while
palladium <XPD=> was at $469.50 from $471.00, having earlier
fallen by as much as 2.3 percent.
Silver rallied in line with gold, rising to $18.58 an ounce,
from $18.45 the day before.
(Editing by Jane Baird)
