Gold rose on Wednesday as investors took advantage of the previous day's 2 percent price drop to buy the metal and as the extreme risk aversion that prompted a flight to liquidity on Tuesday eased. Spot gold was last up 0.7 percent at $1,403.85 an ounce at 1435 GMT, while US gold futures for April delivery rose 0.8 percent to $1,403.80.
Prices fell 2.3 percent on Tuesday in their biggest one-day drop since January. They have since steadied as markets await news from Japan, where experts are working to avert a meltdown at a nuclear power plant. "Now that the dust has settled a little bit and that we've had particularly a recovery in energy and other commodities, that's given a tailwind to gold," said HSBC analyst James Steel.
Unrest that swept the Middle East and North Africa earlier this year, a key factor pushing gold to a record $1,444.40 an ounce last week, continues to simmer. The Libyan army closed in on the opposition bastion of Benghazi on Wednesday, while in Bahrain forces fired tear gas in a crackdown on protesters. "Gold may recover and stabilise, but there could be more downward pressure," said Quantitative Commodity Research consultant Peter Fertig. "It all depends on how tactical people are in managing the situation at the Fukushima nuclear power plant.
"The twin shocks of Middle Eastern political uprisings and the largest earthquake ever to hit Japan have increased downside risks to global growth and metals prices in the short term," said Barclays Capital in a note. Interest in gold exchange-traded funds remained lacklustre, with holdings of the largest, New York's SPDR Gold Trust, edging down by another 0.9 tonnes on Tuesday to a 10-month low, continuing a trend seen throughout this year. Holdings of the US based palladium exchange-traded product declined by 4.3 percent on Tuesday, meanwhile.
Platinum and palladium prices also recovered on Wednesday, but buyers remain nervous on fears the earthquake in Japan could hurt demand for the metals used in auto catalysts. Platinum was last up 1.1 percent at $1,719.49 an ounce against $1,700, while palladium was at $715.00 against $704.50. Silver was bid at $34.89 an ounce against $34.29.
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