Gold wins back safe haven appeal

Tokyo - Gold edged up on Thursday after China's growth data for the second quarter was slightly weaker than expected, helping revive the precious metal's allure as a hedge at a time of economic uncertainty.

Meanwhile, economists expect Beijing to take no dramatic policy response to Thursday's data, which is seen as positive for the precious metal's demand in China, analysts said.

"The GDP figure is still relatively good, and that could prompt the Chinese to buy some amount of gold. So I see an uptrend in the gold-friendly country," said Ong Yi Ling, investment analyst at Phillip Futures in Singapore.

Spot gold was at $1 212.45 per ounce as of 03:46 GMT, up 0.4% from late New York levels of $1 207.50.

It rose to a one-week high of $1 217.85 an ounce on Wednesday. But it later succumbed to profit-taking as the euro and the US equity markets fell, responding to lessening investor interest in taking on risk after a downbeat assessment of the US economic recovery by the Federal Reserve.

Technically, it is expected to rise to $1 223 as the second upward wave "c" is unfolding within a rising channel.

Thursday's data showed China's economy slowed in the second quarter as the government steered monetary and fiscal policy back to normal after a record credit surge last year to counter the global crisis.

China's annual gross domestic product growth moderated to 10.3% from 11.9% in the first quarter. The reading was slightly below market forecast of 10.5% growth.

US gold futures for August delivery rose $5.10 or 0.4% to $1 212.10 per ounce. The contract fell $6.50 to $1 207 on Wednesday.

"The downside for gold appears to be capped and we may see some gains," said Phillip Futures' Ong Yi Ling.

"The pace of the economic recovery is slowing. This is reinforced by the Fed's minutes and weak retail sales figures yesterday and also the weaker than expected Chinese economic figures. This may drive investors to seek out gold as a form of portfolio insurance."

In other financial markets, the Australian dollar jumped about 0.3 percentage point, paring earlier losses, while US S&P stock futures erased earlier losses on Thursday after a series of Chinese data eased worries about a slowdown in China.

The world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, said holdings stood at 1 314.819 tonnes as of Wednesday, unchanged for the second day in a row.

The holdings managed to rise earlier this week, reversing a downtrend from a record 1 320.436 tonnes marked in late June.

  - Reuters