Gold prices bounced on Wednesday in Europe, paring heavy losses from the start of the week, with currencies seen guiding the market in the short term. The precious metal fell to its lowest in five weeks at $457.50 a troy ounce on Tuesday, pressured by speculative selling and a strong US currency.
Spot gold moved back above $460 on Wednesday and was last quoted at $462.90/463.60 by 1436 GMT, up from $459.50/460.25 last quoted in New York.
Analysts said the area around $457/458 was key, with a sustained breach of that level seen attracting further selling.
"If that holds, then we could go back up a bit. But if it breaks, then I think there could be further liquidations from the funds," Stephen Briggs, economist at SG Corporate and Investment Banking, said.
Traders reported buying into the dip, with a slight weakening in the dollar during the afternoon also aiding sentiment in the gold market.
"The support at $458 was very good...and with the dollar weakening a bit, that has helped," one dealer said.
"But I still think you could see some more selling at some point," he said, adding that some participants were looking for a correction back to $450 or even lower.
Dealers kept an eye on the dollar, which hit a two-year high against the yen on Wednesday after the Federal Reserve increased US interest rates for the 12th straight time on Tuesday.
The Fed hinted it would continue with measured rate rises - a move that might further boost the dollar and make dollar-priced gold less attractive to investors.
"Gold is very dependent upon what the dollar does and whether the funds come back in and smack it down again. Some of them seem to be getting a bit tired of it," the trader said.
In Southeast Asia, dealers noted buying at around $460 from jewellers in Thailand, while Hong Kong dealers saw short covering as well as physical intake from local jewellers and Japanese investors.
Any further drop in prices could lift physical demand in India, the world's largest consumer, as jewellers could stock the metal after the end of the peak festival sales this week, dealers said.
In other precious metals, silver rose to $7.50/7.53 from $7.43/7.46 in the US market on Tuesday.
Platinum was quoted at $931/935 an ounce, compared with $923/927 in New York. Dealers said it had attracted buying from the Far East after dipping below $920 the previous day.
"That buying has helped steady the ship a bit," one said.
Palladium gained to $221/225 from $219/222.
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