LONDON: Gold, down in its last eight sessions, traded higher as the dollar remained under pressure after US economic data which indicated there is no need for an abrupt end to Federal Reserve stimulus.
The number of Americans filing new claims for unemployment benefits fell slightly last week — down 9,000 to 346,000 against an expected fall to 345,000 — in line with the recent moderate pace of jobs growth.
“I don’t think we have seen the end of the economic crisis by a long shot, the improvement in the US jobs market is only partial and that is lending support to the gold price,” Sharps Pixley Chief Executive Ross Norman said.
“But I think we could still edge lower in the short term as investors continue to liquidate.”
Gold’s safe-haven appeal has been severely dented since Fed Chairman Ben Bernanke said last week the US central bank plans to start scaling back its $ 85 billion monthly bond purchases in the next few months. That would support an increase in interest rates, making gold less attractive.
Spot gold was up 0.6 percent to $ 1,232 an ounce at 1410 GMT. A 4 percent fall on Wednesday took the metal to its lowest since August 2010 at $ 1,221.80.
Comex gold was up $ 3.20 to $ 1,233.10 an ounce, also near three-year lows touched in the previous session.
“The rebound today is probably driven by a slightly weaker dollar, while yields have also dropped a little bit as well,” Credit Suisse analyst Karim Cherif said.
The dollar fell for the first time in over a week, while the benchmark 10-year US Treasury yield fell below 2.5 percent.
As gold pays no interest, the fall in returns from US bonds and other markets is seen as positive for the metal.
Gold and other commodities have benefited significantly from cheap central bank money over the years. Any pause in US economic recovery momentum would mean a delay in the Fed’s rollback of monetary easing and be positive for bullion.
Gold is down more than 26 percent for the year and is headed for its worst quarterly performance since at least 1968.
ABN Amro was the latest to pare its price forecasts, lowering its 2013 year-end gold forecast to $ 1,100 an ounce from $1,300 and 2014 year-end price to $ 900 from $ 1,000, citing liquidation in funds.
Holdings of the SPDR Gold Trust GLD, the world’s largest exchange-traded gold fund, stood unchanged on Wednesday, after posting their second-biggest percentage drop in holdings this year on Tuesday — down 1.7 percent or 16.23 tons — to their lowest levels in more than four years.
Physical demand has also not picked up in top consumers India and China as much as it did in mid-April when prices fell the most in 30 years.
Silver, which sank 5.5 percent in the previous session, was up 1.9 percent to $ 18.81 an ounce. Platinum rose 1.3 percent to $ 1,318.74 an ounce and palladium was up 1.9 percent to $ 641.47 an ounce.
Gold price makes modest gains as dollar rally cools
