Reuters

Wed Sep 5, 2012 2:01pm EDT

* Gold, silver both overbought – RSI
* Platinum hits fresh 4-month high on South Africa fears
* Market awaits ECB, U.S. payrolls data and Fed meeting
By Josephine Mason and Maytaal Angel
NEW YORK/LONDON, Sept 5 (Reuters) – Gold prices were slightly lower on Wednesday after testing the key $1,700 per ounce mark a day earlier as investors sat on the sidelines ahead of the European Central Bank meeting on Thursday.
While not straying far from Tuesday’s near six-month high, prices were in a narrow $7 range as the market braced for an announcement after the ECB’s Governing Council meeting outlining plans to buy Spanish and Italian bonds.
Hopes that such a program, aimed at lowering borrowing costs for debt-saddled countries, was in the offing has already sent bullion 9 percent higher over the past six weeks.
“The big investors are not committing new money at this stage. Buying on the eve of a big ECB meeting is not wise. To come out and buy today, you’re late to the party,” said Adam Sarhan, chief executive of Sarhan Capital.
Spot gold edged down 0.17 percent to $1,691.20 an ounce by 1:39 p.m. EDT (1739 GMT). U.S. gold was down 0.12 percent at $1,693.9.
Encouraged by Fed Chairman Ben Bernanke’s comment last week on the grave conditions of the U.S. labor market, which kept the door open for more stimulus measures, spot gold rose to $1,698.45 on Tuesday, its highest level in nearly six months.
The first two rounds of U.S. quantitative easing have doubled gold prices in the last four years. The Fed’s next policy meeting is scheduled for next week, but a crucial U.S. job report this Friday could impact the Fed’s decision making.
Some analysts were disappointed after sources said the buying could be sterilized, which would mitigate the risk of inflation and potentially lessen investor interest in gold.
Such a move by the ECB would be in contrast to quantitative easing or outright asset purchases by the U.S. Fed which has a more accommodative policy.
“The ECB’s new bond buying plan is not something likely to cause inflation, it’s not quantitative easing, it’s entirely different,” Natixis analyst Nic Brown said.
Technically bullion’s chances of a break-out above $1,700 per ounce have waned after failing to pierce the psychologically key level on Tuesday, analysts said.
The Relative Strength Index (RSI) readings on spot gold and silver remained above 70, suggesting they were still in overbought territory.
Spot silver fell 0.31 percent to $32.28 an ounce, easing from a 4-1/2-month high of $32.42 hit in the previous session.
SOUTH AFRICA VIOLENCE
Platinum hit fresh four-month highs just above $1,571 per ounce amid mounting concerns that the violence that has erupted in South Africa, the world’s largest producer of the metal used in jewelery and auto catalysts, shows no signs of abating.
More than 3,000 striking miners marched through streets near the Murikana mine, owned by world No. 3 producer Lonmin, on Wednesday in the largest protest at the hot spot since police shot dead 34 workers last month.
Prices surged 9 percent after the labor dispute turned deadly. Now concerns are escalating that the country’s mining industry will get sucked into the trauma as labor disputes spread from platinum to gold.
Platinum was up 0.22 percent to $1,566.18 while palladium was up 0.47 percent at $639.8.
URL: http://www.reuters.com/article/2012/09/05/markets-precious-idUSL6E8K55YV20120905