Greenback dips, easing from three-month highs
Gold (GC-FT1,098.804.800.44%) prices rallied more than 1.5 per cent on Thursday to above $1,100 an ounce as the dollar lost ground and on the back of robust investment flows betting on higher bullion prices.
Other precious metals took their cue from gold's strength with both palladium (PA-FT376.0018.655.22%) and platinum (PL-FT1,458.4031.602.21%) rallying to their highest in about a week at $375 an ounce and $1,4560.50 an ounce respectively.
Spot gold was at $1,104.05 an ounce by 1035 GMT, versus $1,087 an ounce late in New York on Wednesday. Bullion tumbled to a seven-week low of $1,074.10 an ounce earlier this week.
Analysts said the price moves were partly exaggerated due to low liquidity because of the Christmas holiday period, but the fundamentals which sent gold to an all-time high of $1,226.10 an ounce in early December were also still in place.
“Gold's rising because of a weaker dollar,” said Daniel Smith, analyst at Standard Chartered. “But also the recent selloff was a bit overdone as a lot of the factors that supported gold are still in place,” he said.
The dollar dipped, coming off three-month highs against a basket of currencies after weak U.S. housing data the previous day dampened optimism about the outlook for the U.S. economy.
A weaker dollar makes gold cheaper for non-U.S. investors and boosts its appeal as an alternative asset.
At current levels, bullion was set to post its biggest one-day percentage gain in more than three weeks.
“Investor flows have held up pretty well. Physical demand in places like India has been strong and I think that's going to be supportive of the prices,” Mr. Smith said, adding he expected a volatile trade due to holiday-thinned liquidity.
U.S. gold futures for February delivery rose 1.1 per cent to $1,106.40, compared to $1,094.00 an ounce on the COMEX division of the New York Mercantile Exchange. Futures also hit a seven-week low of $1,075.20 on Tuesday.
The world's largest gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings stood at 1,132.708 tonnes as of Dec. 23, unchanged from the previous business day and staying just below a record high of 1,134.03 tonnes hit on June 1.
The world's largest silver-backed exchange-traded fund, iShares Silver Trust, said its silver holdings stood at 9,492.97 tonnes as of Dec. 23, unchanged from the previous business day, after easing from a record high of 9,514.35 tonnes on Dec. 22.
Among other precious metals, spot silver (SI-FT17.270.070.44%) was bid at $17.30 an ounce against $17.09. Platinum was at $1,454 an ounce against $1,418.50, while palladium was at $374 against $355.50.
