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[BENGALURU] Gold rose for a second day on Wednesday as investors sought hard assets amid a drop in the US dollar after a report of weaker US economic data increased expectations that the Federal Reserve would not raise interest rates in the short-term.
Spot gold climbed 0.6 per cent to US$1,348.91 an ounce by 0311 GMT. The yellow metal gained 0.4 per cent on Tuesday.
US gold was up 0.6 per cent at US$1,355 an ounce.
Palladium surged over 6 per cent to touch a high of US$745 an ounce, the highest since June 11, 2015.
US worker productivity fell for the third straight quarter in the spring this year, suggesting that corporate profits may continue to decline and wage growth may remain sluggish.
The US dollar index, which gauges the greenback against a basket of six major currencies, fell 0.4 per cent to 95.777 .
"It's a noisy trading without trend. With a falling dollar, we would see short term rise in gold and silver prices," said Jiang Shu, chief analyst at Shandong Gold Group.
"The dollar is due for a rising trend and the gold rally, although it has some short term upside, can't last very long."
With no major new economic indicators due this week, Mr Shu expects gold to trade in a range of US$1,330 to US$1,350 an ounce.
Spot gold may gain more to US$1,354 per ounce, as it has cleared a resistance at US$1,346, according to Reuters technical analyst Wang Tao.
The unexpected drop in productivity may confirm the Fed's worst fears of a US economy slipping into an extended period of slow growth with little it can do about it.
"A better tone to equity markets, coupled with the increasing odds of a Fed move later this year suggest that the dollar should likely do better over the second half of the year. The combination of this should constitute a net negative for gold," INTL FCStone analyst Edward Meir said in a note.
Gold is highly sensitive to rising US interest rates, which lift the opportunity cost of holding non-yielding bullion, while boosting the US dollar, in which the metal is priced.
Investment interest in gold-backed exchange-traded funds was less buoyant than in recent months with holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, falling for a second straight day on Tuesday. Holdings slipped 0.12 per cent to 972.62 tonnes from Monday.
Spot silver was up nearly one per cent at US$20.02 an ounce.
Spot platinum rose 1.3 per cent to US$1,164.85.