Gold edges up

Gold prices inched up on Thursday but sentiment was bearish as weakness in oil prices reduced the metal's appeal as a hedge against inflation, prompting investment funds to shift into bullish equities.
Cash gold was lifted by bargain hunting after falling nearly 8 percent over the past week as short-term funds shifted out of commodities. Still, many investors were reluctant to take big buy positions after suffering heavy losses. "Many players are taking a wait-and-see attitude now after seeing sharp falls this week," said Akira Doi, a director at Daiichi Commodities Co Ltd.
"Gold can come under more selling pressure, but gold looks oversold. I don't think prices will decline further from the current level." Spot gold was trading at $569.00/570.00 an ounce compared with $566.00/567.00 in late New York, where it fell nearly 2 percent.
Investors have shunned energy futures and metal this week to chase stocks after the Dow Jones industrial average rose to record levels. Gold fell as far as $559.40 on Wednesday the lowest level since it hit $543 on June 14. This was down nearly 8 percent from $606.50 on September 28. Technical sentiment was bearish after the price dipped below key moving average levels. Cash gold was 5 percent below the 200-day moving average of around $600.
Oil will continue to set direction for gold, traders said. The recovery in crude oil prices on Thursday made traders reluctant to sell gold strongly, but the metal remained vulnerable to selling by fund operators, they said.
US crude oil futures leapt more than 60 cents to above $60 a barrel after the financial Times reported that Opec members had agreed informally on the need to cut output. "Short-term funds are liquidating and pulling out their money from gold and shifting them into bullish US stocks," said a senior trader at a Japanese trading house.
"Technicals look weak, but we are also seeing a lot physical buying, especially after gold dipped below $600," the trader said. "The long-term trend still looks bullish." Weakness in Tokyo gold futures undermined sentiment for cash gold in the absence of Chinese buyers because of the weeklong National Day holiday, which started on Monday.
Benchmark Tokyo Commodity Exchange gold futures for August 2007 delivery closed the session down 1.8 percent at 2,176 yen a gram from Wednesday's close. The contract moved in a range of 2,164 to 2,180 yen. Silver nudged up to $10.83/10.90 an ounce from $10.78/10.85 late in New York. Platinum edged up to $1,086/1,091 an ounce, compared with $1,075/1,085 in New York. Palladium was up at $296.50/301.50 an ounce from $289/294 in New York.