Gold snaps two-day fall on lower dollar, Chinese buying
London (Nov 28) Gold snapped a two-day decline on Thursday, as the dollar edged lower and signs of physical demand emerged from Chinese buyers.
Gains were kept in check by strong US economic data suggesting an end to the Federal Reserve’s stimulus programme.
Activity was relatively thin, as US financial markets were shut on Thursday for Thanksgiving.
"There’s a bit of physical-related buying from the Far East, including China," MKS SA head of trading Afshin Nabavi said.
"Other than that, I don’t think we are going see a lot of fresh positions this week with the US on holiday," he added.
Spot gold rose 0.6% to $1,243.65 an ounce by 2.55pm GMT. It fell to a four-and-a-half-month low of $1,227.34 on Monday.
US gold futures rose 0.5% to $1,243.60/oz.
"The story for gold remains pretty much the same ... and the drivers for now remain the dollar and the US data," VTB Capital Andrey Kryuchenkov said.
The dollar index fell 0.2% against a basket of currencies, retreating after gaining from relatively positive US data in the previous session.
US jobless claims unexpectedly fell last week and the November Thomson Reuters/University of Michigan consumer confidence index improved from a preliminary reading. The Chicago purchasing managers index held up better than expected last month after surging in October.
However, a soft October durable goods report was the only dent to an otherwise upbeat set of figures.
Investors speculate that strong economic data could prompt the Fed to cut back on its $85bn in monthly bond purchases, which have bolstered gold as a hedge against inflation over the past few years.
As a gauge of investor sentiment, holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund (ETF), fell 5.7 metric tonnes to 843.21 tonnes on Wednesday to their lowest since early 2009.
The fund has seen outflows of more than 450 tonnes this year as investors put more money into rallying equities. The outflows from ETFs have been a big factor in gold prices dropping more than 25% in 2013.
Chinese buying strong
China, which is expected to overtake India as the biggest consumer of the metal this year, has seen a pick-up in demand this week due to lower prices.
Traded volumes of 99.99% purity gold on the Shanghai Gold Exchange hit 18.3 tonnes on Thursday, their highest since October 8, according to Reuters data.
China’s net gold imports from Hong Kong climbed to their second highest on record in October as it bought more than 100 tonnes of gold for a sixth straight month to meet unprecedented demand.
Silver rose 0.2% to $19.68/oz, after falling 1% in the previous session. Spot platinum gained 0.5% to $1,355.55/oz after losing more than 1% in each of the previous two sessions and spot palladium gained 0.2% to $714.75/oz.
