Gold Extends Rebound On Bargain Hunting, Safe-Haven Demand

Gold extended gains into the European session on Tuesday, rebounding from a 34-month low, as buyers in China continued to snap up deals after prices tumbled to a three-year low last week, while concerns over political turmoil in Egypt gave the metal a hand.

As of 2:24 ET, gold for immediate delivery edged 0.02 percent or 0.10 points higher to trade at $ 1,258.45 an ounce after opening at $1,252.81, having earlier hit a high of $1,260.48, and a low of $1,250.57.

Gold prices were boosted after reports on Monday said there has been an increase in demand for physical gold coming from China, even as holdings in the largest bullion-backed exchange-traded product resumed a decline.

Reports showed physical buying has improved in Hong Kong, yet demand is not as strong as it was in April. Gold premiums in Hong Kong are seen as a guide to demand in China, the largest consumer after India in 2012.

Holdings in the SPDR Gold Trust, the world`s largest gold-backed exchange-traded fund, fell to 968.3 metric tons yesterday, to their lowest since February 2009, after holding steady for three days.

Gold rallied on Monday following some end-of-quarter short-covering that boosted gold futures last Friday, while traders were optimistic after U.S. Federal Reserve remarks on the need to maintain the bank`s stimulus measures.

Bullion, typically seen as a hedge against inflation, declined nearly 23 percent last quarter, the largest quarterly loss on record, as speculation that the end of Fed stimulus would arrive sooner rather than later hit gold futures hard this month. The so-called quantitative easing has been credited for supporting a rally in gold in recent years.

Investors are waiting for the U.S. nonfarm payrolls data due on Friday to determine the strength of the U.S. economic recovery. Investors have been taking their cues from U.S. jobs data as they attempt to gauge when the Federal Reserve will begin to slow the pace of its bond buying program this year.

Other precious metals were as follows:

- Silver lost 0.24% to trade around $ 19.70

- Platinum rose 0.04% to $ 1,379.25

- Palladium edged 0.09% higher to $ 686.90

The metal was also boosted by growing unrest in Egypt as rising tensions in the Middle East typically increase gold’s appeal as a safe haven investment.

Egypt unrest is in the news headlines again, where major riots are occurring in Cairo to protest the elected government of Mohamed Morsi. Gold could be seeing some fresh safe-haven demand due to the violence in Egypt.