Gold rebounds

Spot gold rebounded from a seven-week trough on Tuesday, tracking equities and the euro higher as investors positioned themselves for a Federal Reserve meeting and turning attention away from the eurozone credit crisis for the moment. The euro rose to a session high against the dollar. A weaker dollar makes gold priced in the unit cheaper for holders of other currencies.
"Markets were languishing at lower numbers and once they broke out of that range there were probably close-rated stops," a London-based metals trader said. Spot gold was up 0.02 percent at $1,665.94 an ounce by 1533 GMT after posting its biggest one-day drop in nearly three months in the previous session. It touched $1,650.89 earlier, its lowest since Oct. 25, and rose to a session high $1,677.69.
In a note to clients earlier, Standard Bank analyst Walter de Wet wrote he expected physical demand to return as the metal approached $1,650, with key support at its 200-day moving average at $1,617. "Since early 2009, gold has consistently bounced off its 200d MA. Unless funding issues in Europe deteriorate substantially from current levels, we expect this support to hold," he said.
The euro recovered from a two-month low versus the dollar, and stocks rose after sharp sell-offs on disappointment about last week's "last ditch" EU summit to come up with a clear plan to tackle the single bloc's debt crisis. Investors will also closely watch for moves by the ratings agencies. Moody's Investors Service said on Monday it intended to review the ratings of all 27 members of the European Union in the first quarter of 2012 after EU leaders offered "few new measures" to resolve the crisis in the summit on Friday.
Standard & Poor's last week warned of a possible downgrade of 15 eurozone nations. Italian and Spanish bond sales later this week also are likely to provide a barometer of market sentiment. "It's all about anxiety and worry," said Nick Trevethan, senior commodities strategist at ANZ in Singapore. "Gold is just getting lumped in with other markets as risky assets, not necessarily for the right reason."
Wild swings in gold prices since August have tarnished its reputation as a safe haven, and bullion has moved in tandem with riskier assets in the past few months. "The bigger macro issues are still there, which would generally be supportive for gold, but right now it's all about the noise around the continued political failure in Europe," Citi analyst David Wilson said.
SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, reported that its holdings dropped 0.605 tonnes to 1,294.796 tonnes by Dec. 12, the lowest in three weeks. Physical buying picked up in Asia after the sharp decline in prices, but many were hesitant to buy in bulk ahead of the year-end, especially while market sentiment remains fragile on concerns about Europe's troubles, dealers said. Spot platinum rose 0.8 percent to $1,479.53 an ounce, off a seven-week low of $1,476.23 hit in the previous session.