07/06/07: Gold recovers but analysts warn of bearish conditions

The price of gold recovered losses in New York trading yesterday, but traders noted that interest from investors was noticeably lacking, Reuters reports.

Spot gold rose to $669.80 an ounce in mid-afternoon, following the announcement by the European Central Bank that interest rates would rise to 4.0 per cent. It had previously fallen as low as $665.50.

However, trader Jonathan Jossen said that options trading had been sluggish.

"Options trading over the last two weeks was very bearish," he noted. "Hedge funds and mutual funds had been buying a lot of puts."

Other analysts suggest that gold needs to move above $675 in order to retain its current good run; if not, it is likely to fall back down to around $660.

The gold market is continuing to absorb the news that Spain's central bank sold almost one million ounces of bullion during May, with the country's economy minister saying that "gold is not a profitable asset".