Gold recovers from one-week low as dollar, equities sag

[NEW YORK] Gold prices recovered on Thursday from the more than one-week low they had reached overnight as a rally in both the dollar and equities ran out of steam, but the precious metal remained vulnerable to further declines.

The dollar index fell against a basket of currencies as 10-year Treasury yields dropped.

Gold was up 0.4 per cent at US$1,286.31 an ounce by 2.40pm. EDT (1840 GMT), after earlier hitting its lowest since Oct 9 at US$1,276.22. Gold has lost 6 per cent since Sept. 8.

US gold futures for December delivery settled up US$7, or 0.6 per cent, at US$1,290 per ounce, hitting $1,277.60, its lowest since Oct 6.

US jobless claims fell 9 per cent during the week ended Oct 14 to 222,000 from 224,000, the US Labor Department said on Thursday.

World stock markets slipped from a record high on Thursday after a flurry of tepid corporate earnings reports but were off session lows as Wall Street pared losses, while demand for safe-haven assets pushed US Treasury yields lower.

"There's technical reasons why we've stabilised, stocks have come off, (but overall) people are not finding much value investing in gold at the moment," said Fawad Razaqzada, an analyst at FOREX.com.

"The lack of safe-haven demand combined with expectations of higher interest rates is weighing. If gold remains below US$1,300, there's a risk of a deeper correction in the coming days or weeks."

Federal Reserve Chair Janet Yellen's current term ends in February, and investors are waiting to see who US President Donald Trump will pick as her replacement. The White House said a decision would be announced in coming days.

Higher interest rates typically boost the dollar and bond yields, pressuring gold by increasing the opportunity cost of holding non-yielding bullion.

"Fundamentally, the US economy is still doing well, but the worry is that there is not much inflation in the system,"said Ryan McKay, commodity strategist at TD Securities in Toronto.

"Without the inflation, the market is expecting that the Fed won't raise rates three times in 2018, as the documents are suggesting, and that would make it more bullish for gold."

Canada's Bank of Nova Scotia is exploring options for its gold business ScotiaMocatta, including a possible sale of the world's oldest gold trader, three sources familiar with the matter said on Wednesday.

Silver rose 1.24 per cent at US$17.19 an ounce, platinum rose 0.4 per cent at US$921.80 and palladium was up 0.4 per cent at US$956 per ounce.

Platinum and palladium hit one-week lows overnight.

REUTERS