Gold advanced for the first time in seven sessions amid declines in the dollar and speculation that Monday’s plunge to a five-year low was excessive.
The metal’s 14-day relative-strength index, a gauge of momentum, fell to 17.3, below the level of 30 that signals to analysts who study charts that prices may rebound. The reading was the lowest since April 2013, when gold dropped into a bear market. The Bloomberg Dollar Spot Index fell 0.6 percent, boosting bullion’s appeal as an alternative investment.
Gold has fallen about 7 percent this year on expectations that the Federal Reserve will raise interest rates, curbing demand for bullion that generally offers returns only through price gains. There’s a greater than 50-50 chance that rates will increase in September, St. Louis Fed President James Bullard said Monday. Holdings in exchange-traded products backed by gold are the smallest since 2009.
“We’re seeing a bit of a breather on the dollar to the downside, which is ultimately contributing to the slight recovery in gold,” Tim Evans, the chief market strategist at Long Leaf Trading Group Inc. in Chicago, said in a telephone interview. “We’re also seeing somewhat of a technical recovery in the metals complex. Barring any unforeseen change in the fundamentals, the downside trajectory will remain in place.”
Bullion for immediate delivery rose 0.4 percent to $1,100.41 an ounce at 2:43 p.m. in New York, according to Bloomberg generic pricing. Prices reached $1,086.18 on Monday, the lowest since March 2010.
Gold futures for delivery in August slipped 0.3 percent to settle at $1,103.50 on the Comex in New York.
Fed Chair Janet Yellen’s reiteration last week that U.S. rates will probably rise this year is “not a good-news story for gold,” Jake Klein, executive chairman of Evolution Mining Ltd., Australia’s third-biggest producer by market value, said on Tuesday. The central bank has held borrowing costs near zero since 2008.
Investors sold 19.1 metric tons through gold-backed funds since July 15, the biggest three-day disposal since December 2013, data compiled by Bloomberg show. They now hold 1,568.2 tons.
“Any rebound today is purely technical and would probably be just a ‘dead-cat bounce,’” said Howie Lee, an investment analyst at Phillip Futures Pte in Singapore. “The bleeding may stop in the meantime, but that doesn’t mean the wound has closed.”
Silver for immediate delivery climbed 0.7 percent to $14.8142 an ounce, after dropping to the lowest since December on Monday. Palladium and platinum prices advanced.