Gold rose 1.3 percent on Friday, rebounding from nearly a three-year low earlier, but for the week it still dropped the most in nearly two years after the US Federal Reserve's most explicit indication to end its stimulus sparked a global market rout.
Despite Friday's gain, spot gold was still 7 percent lower for the week, its biggest weekly decline since it fell from record highs in September 2011. Bargain hunting by investors and physical buyers helped offset a 25 percent increase in the margins of US gold futures. Steadier US equities and Treasuries markets also allowed gold investors to take a breather following Thursday's 5.5 percent decline.
"We've had some forced selling in gold as a result of margin calls in the equity markets. That had exacerbated selling yesterday and allow the gold market to consolidate higher today," said Bill O'Neill, partner of commodities investment firm LOGIC Advisors. Open interest in US Comex futures showed a surprise 3 percent increase after Thursday's sharp pullback, a sign that possible short-covering could help boost gold prices in the near term, O'Neill said.
Spot gold was up 1.3 percent at $1,293.99 an ounce by 2:23 PM EDT (1823 GMT), having earlier hit its lowest since September 2010 at $1,268.89 an ounce. US Comex gold futures for August delivery settled up $5.80 at $1,292 an ounce, with trading volume at 177,000 lots versus its 30-day daily average at 208,000, preliminary Reuters data showed.
The CME Group Inc raised initial margins for Comex gold futures after prices plunged to their lowest in three years on Thursday, when US gold futures ended 6.4 percent lower in heavy trade. Holdings of the world's largest physically backed gold exchange-traded funds - a popular way to invest in bullion since the financial crisis - have fallen more than 485 tonnes this year, Reuters data showed.
The largest gold ETF, the SPDR Gold Trust, reported a 4.5-tonne drop in its holdings on Thursday, taking them to their lowest in more than four years at 995.35 tonnes. That was 26 percent below their December 2012 peak of 1,353 tonnes. Sales performance at US bullion dealers are largely mixed. The US Mint said it sold 1,500 American Eagle one-ounce gold bullion coins, and 60,000 one-ounce silver coins on Thursday. Both gold and silver bullion coin sales came below their 2013 daily average.
American Precious Metals Exchange's APMEX Bullion Center on eBay posted its second highest daily sales since its launch in October 2012, said Michael Haynes, CEO of the bullion dealer. Physical buying in No 1 bullion consumer India, however, remained muted despite Thursday's price drop, in contrast to the heavy buying seen after gold's April sell-off. Silver also dropped to its lowest since September 2010 at $19.35. It last traded at $20.02 an ounce, up 2.4 percent. Platinum rose 1.2 percent to $1,372.49 an ounce, while palladium gained 1.8 percent to $673.22 an ounce.
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