Futures & Commodities

Gold rises above $1,200 as buyers cash in on dips

Key Points
  • Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell to their lowest since February 2016.

Gold rose on Thursday as recent weakness tempted some price-sensitive buyers back to the market and a retreat on stock markets sparked some safe-haven demand.

Spot gold was up 0.5 percent at $1,203.01 an ounce, having traded in a narrow $34 range for more than a month. U.S. gold futures were 0.3 percent higher at $1,206.80 an ounce.

Gold has fallen more than 12 percent since hitting a peak in April, under pressure from a stronger dollar that has been boosted by a vibrant U.S. economy, rising interest rates and fears of a global trade war.

"The move shows signs of gold strength," said Commerzbank analyst Carsten Fritsch. "The metal has fallen too much to a level that cannot be justified by fundamentals."

Appetite for gold at lower prices helped gold shrug off a surge in U.S. Treasury yields to their highest since mid-2011, pulling global bond yields higher and supporting the dollar near six-week highs. Equities sagged in response.

Kitco Metals senior analyst Jim Wyckoff said some investors had turned to gold as a safe haven over inflation concerns. Gold is often used as a hedge against inflation risk. But he said Thursday's gains were mainly on technical buying.

"There is some balance with central banks buying gold quietly and individual investors and hedge funds trying to sell gold," Hussein Sayed, chief market strategist at FXTM.

"Gold is steady around $1,200 levels, which shows that the market is trying to put a floor on price," Sayed said.

Higher interest rates tend to boost the dollar and push bond yields up, putting pressure on gold prices by increasing the opportunity cost of holding non-yielding bullion.

Looking ahead, investors are awaiting U.S. non-farm payrolls numbers due on Friday, with a Reuters survey showing economists on average expect a rise of 185,000 in September after jumping 201,000 in August.

Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, dropped 0.8 percent on Wednesday, having declined more than 4.5 million ounces since late April.

Among other metals, spot silver was up 0.8 percent at $14.70. Palladium was 0.1 percent higher at $1,056.72, while platinum rose 0.5 percent to $825.80.