July 07, 2010, 2:09 PM EDT
By Pham-Duy Nguyen
July 7 (Bloomberg) -- Gold futures rose in New York, erasing losses, on speculation that the lowest prices in six weeks reflected a sell-off that was overdone. Gold touched $1,185 an ounce today, the lowest price since May 24, as the Standard & Poor!s 500 Index rose for the second straight day. Assets in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, have dropped for three days in a row. Since reaching a record $1,266.50 on June 21, gold has declined 5.3 percent.
“Some will look at the selling as overdone,” said Matt Zeman, a trader at LaSalle Futures Group in Chicago. “A lot of technical damage has been done. In the short term, there are oversold conditions.”
Gold futures for August delivery rose $3.80, or 0.3 percent, to $1,198.90 on the Comex in New York, after dropping as much as 0.8 percent. The metal has gained 9.4 percent this year. Earlier, gold!s seven-day relative-strength index was below 30 for a second session, a signal to some traders that the price is poised to rise. The amount of bullion held in the SPDR Gold Trust fell 2.43 metric tons to 1,316.48 tons yesterday, according to the company!s website. It was the third straight decline, the longest slump since January. Gold demand in China gained in the first half as government measures to cool the property market and falling equities spurred purchases, Song Yuqin, a vice general manager at the Shanghai Gold Exchange, said today at a conference in Beijing.
China!s Holdings
China held 1,054.1 metric tons of gold last month, ranking sixth in the world behind the U.S., Germany, the International Monetary Fund, Italy and France, according to the World Gold Council. The metal makes up about 1.6 percent foreign reserves in China, which purchased 454 tons from 2003 to 2009, according to the producer-funded council.
The precious metal is unlikely to become a major holding in China!s foreign reserves because of wide price swings and a lack of interest payments, China!s State Administration of Foreign Exchange said in a statement. China will “carefully consider” whether to raise or reduce the amount of gold it has, the regulator said.
Silver futures for September delivery rose 14.3 cents, or 0.8 percent, to $18 an ounce on the Comex.
Platinum futures for October delivery rose $7.70, or 0.5 percent, to $1,526.40 an ounce on the New York Mercantile Exchange. Palladium futures for
September delivery rose $1.95, or 0.4 percent, to $442.35 an ounce.