Gold managed a modest gain on Wednesday, settling above a key technical support level of $1,275 an ounce, though the metal is vulnerable to further losses as investor demand remains slack, analysts said.
The bullion market found some support after Commerce Department data showed sales of new U.S. single-family homes tumbled to their lowest level in eight months in March, dealing a setback to the housing market recovery.
Earlier, gold traded in a less than $10 range, holding above its 100-day moving average of $1,277 an ounce, after the previous session's fall to a 2-1/2-month low near that level.
"We continue to watch gold between the $1,275 and $1,280 level where key support is still apparent. If taken out, we could see rather heavy stop-loss selling set in," said Edward Meir, metals analyst at INTL FCStone.
for June delivery ended $3.50 higher at $1,284.60 an ounce. Meanwhile, spot gold gained 0.1 percent to $1,284 an ounce.
Physical demand in Asia, which tends to provide some support at lower price levels, failed to emerge after Tuesday's drop as buyers expect more price declines, dealers said.
Demand has been quiet in top buyer China as a weaker yuan made it more expensive to buy dollar-denominated gold. China's yuan hit a 16-month low against the dollar on Wednesday.
Investment demand also remained weak with the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, seeing sharp outflows in recent days. Last week alone, the fund's outflows totaled 9.3 tons, erasing all the gains made in the year.
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