London 05/12/2012 - Gold bounced back above $1,700 in early European trading on Wednesday following comments from Beijing on its domestic investment plans.
Spot gold was last at $1,702.95/1,703.75 per ounce, up $8.15 on Tuesday’s close, having ended below the psychologically important $1,700 level for the first time in a month.
"The markets have become more upbeat on hopes for a recovery in China after its new leaders pledged to keep their focus on urbanisation and promoting domestic demand," FastMarkets' William Adams said.
"However, progress may still be limited until the US addresses the fiscal cliff," ANZ said in a note, also highlighting a large sale order of around 3,000 lots on Comex in Asia.
"The order triggered stops and pushed prices down by more than one percent in the space of a few minutes," it said. "The slide was reminiscent of an even larger sell order last week. We think this was another attempt to try to uncover some sell stops, coming as it did at a time of minimal liquidity."
In the US, wrangling over the fiscal cliff - a range of spending cuts and tax hikes totalling $600 billion due to come into force in January and February - continues.
Markets fear the country could slip back into recession if the laws bringing these measures into force are not repealed - but so far, the White House and Congress have not been able to agree a deal.
Indeed, hopes for an agreement took a step back when President Barack Obama rejected a Republican proposal to resolve the crisis, saying that any deal must include tax increases on the rich.
The data calendar is again rather heavy – earlier, the European services PMI at 46.7 beat expectations but the Italian number disappointed. The US ADP non-farm change in unemployment - forecast at 129,000 - will follow at 13:15 GMT.
In the UK, Chancellor George Osborne is expected to extend austerity measures when he addresses parliament in Westminster later today.
Elsewhere in Europe, Spain's borrowing costs have also trended lower following the country’s formal application for a bailout - yields on its 10-year bond slipped to 5.29 percent in its latest auction.
In equities, Asian and European indices are higher, with the Nikkei gaining more than 0.3 percent and the Hang Seng adding more than two percent, while the FTSE 100 and the Dax are both about a 0.3 percent higher.
In currencies, the euro was also relatively stable at just below 1.31. In other commodities, Brent crude oil regained the $110 mark and three-month LME copper was at a seven-week high at $8,074.75 per tonne.
Other precious metals echoed gold's performance, with silver up 0.7 percent or 23 cents at $33.06/33.11 per ounce, platinum $6 higher at $1,585/1,595 and palladium up $5 at $686/687.
(Editing by Mark Shaw)