LONDON, July 11 (Reuters) – Gold steadied near 3-1/2-month highs on Friday as stock markets recovered from the selloff seen in the previous session on concerns over the health of Portugal’s biggest bank, with the metal still on track for a sixth week of gains.
European shares recovered following Thursday’s slide, taking some upward pressure off gold, but investors remained cautious as Banco Espirito Santo attempted to reassure the market after trading in its shares was suspended.
Concerns over the financial stability of the euro zone have driven gold prices sharply higher in previous years, as investors bought the metal as a safe store of value.
Spot gold was at $1,337.50 an ounce by 1204 GMT, up 0.2 percent but off the previous day’s peak of $1,345, its highest since mid-March. U.S. gold futures for August delivery were down 20 cents an ounce at $1,339.00.
“Geopolitical uncertainty and concerns of any potential contagion into Portugal’s wider banking sector and indeed the euro zone’s wider banking sector were clearly supporting gold yesterday,” Mitsubishi analyst Jonathan Butler said.
“The longer-term trend since early June shows that there is still underlying strength in gold.”
Major currency markets held steady in Europe on Friday, having ridden out a day of ructions in European stocks with only minimal moves on the euro and yen.
Strategists were sceptical of whether concerns about Portuguese bank BES would prove the trigger for an immediate change in market tone away from the steady, low-volatility plays of the past six months.
IMPORT DUTY UNCHANGED
In the physical markets, India caused a surprise on Thursday by keeping the import duty on gold and silver unchanged at 10 percent in its fiscal budget, a move likely to limit overseas purchases by the second-biggest bullion consumer and further encourage smuggling.
“That the new government opted to abstain from any mention of gold is negative in our view,” UBS said in a note.
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