Gold recovers in London after three days of slump

Gold regained ground in London today after the metal's biggest weekly drop in more than three months spurred investor demand.

Gold had slumped as much as 11 per cent between Tuesday and Thursday after touching a record $1,913.50 an ounce on 23 August, as European equities fell and the dollar weakened versus most major currencies.

Traders are waiting to see whether Bernanke will signal further steps to support the economy when he speaks today. He has earlier said the central bank will keep borrowing costs near zero at least through mid-2013.

The metal declined on Wednesday on speculation that financial markets may be stabilising after reports on durable-goods orders and home prices beat analyst estimates. Global equities climbed to a one-week high on Thursday. 

Immediate-delivery gold rose $14.70, or 0.8 per cent, to $1,788.85 an ounce by 10:03 am in London. Prices are down 3.5 per cent this week, the most since May. The metal for December delivery was up 1.5 per cent at $1,789.90 on the Comex in New York.

Bullion is in the 11th year of a bull market, the longest winning streak since at least 1920 in London, as investors seek to diversify away from equities and some currencies. Before this week, gold had climbed for seven consecutive weeks, the longest run of gains since April 2007.

UBS AG's physical gold sales to India on Thursday were more than twice the daily average and are set for the best week since May, as Indian the festive season approaches. Edel Tully, a London-based analyst at UBS, wrote in a report, ''We expect a stronger buying response today.''