Gold settled higher on Thursday as tensions over Ukraine increased and equity markets retreated, but analysts said the rebound could be short-lived due to strong U.S. economic growth and prospects of a U.S. interest rate hike.
NATO said on Thursday well over 1,000 Russian troops are operating inside Ukraine, marking a significant escalation of Moscow's military involvement in the country.
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Gold rose as much as 1 percent early in the day but later cut gains after data showed the U.S. economy rebounded more strongly than initially thought in the second quarter. A bigger chunk of the growth was driven by domestic demand in a bright sign for the future.
"The market woke up on geopolitical headlines around Ukraine but we gave up some gains because of very strong U.S. economic data," VTB Capital analyst Andrey Kryuchenkov said.
closed $7.00 higher $1,290.40 an ounce, while spot gold gained 0.6 percent to $1,290 an ounce.
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The metal benefited from lower global equities and worsening international tensions after Ukraine accused Russia of bringing troops into the southeast of the country, and news more than 100 Russian soldiers were killed in eastern Ukraine in a single battle this month while helping pro-Russian separatists fight Ukrainian troops.
The dollar index rose 0.1 percent against a basket of currencies after data showed the number of Americans filing new claims for unemployment benefits fell for a second straight week last week.
Positive data could increase already-high pressure within the Fed to more clearly acknowledge improvements in the U.S. economy as early as next month and lay the groundwork for the central bank's first interest rate hike in nearly a decade.