Gold rises on US dollar weakness, pause in stocks rally

[BENGALURU] Gold prices rose for a second day on Thursday, extending the gains in the previous session when prices climbed to the highest since September, as US dollar weakness and a flagging rally in equities enticed investors to buy the yellow metal.

Spot gold was up 0.2 per cent at US$1,318.98 an ounce by 0242 GMT. Prices rose to as high as US$1,326.56 an ounce on Wednesday, the most since Sept 15.

US gold futures were little changed at US$1,319.10 an ounce.

Gold prices on Wednesday rose over 1 per cent as the US dollar swooned after a report that Chinese officials had recommended slowing or halting purchases of US Treasury securities.

Officials reviewing China's foreign-exchange holdings have recommended slowing or halting purchases of US Treasuries, Bloomberg News reported on Wednesday, citing people familiar with the matter.

The US dollar fell to its lowest since November against the Japanese yen and weakened against a basket of major currencies on Wednesday after the report. It fell 0.1 per cent to 92.29 on Thursday.

"Rising oil prices and strong global growth suggest gold will remain supported as investors look for inflation protection," said Stephen Innes, APAC head of trading at Oanda.

"Also, a highly anticipated stock market correction is providing support on dips which continues to support the bullish gold narrative." Oil prices held near three-year highs on Thursday, supported by a surprise drop in US production and lower crude inventories.

The rally that has started this year in Asian shares paused on Thursday as concerns about the US administration's protectionist stance hit Wall Street while US bonds were dented by the speculation that China may curtail buying.

"Gold could test US$1,327 in the short term and above which US$1,362 will be opened ... Global equities are running at high level of exuberance, confidence and valuation extreme which in short stands for bubble," said Amit Kumar Gupta, portfolio management services head at Adroit Financial Services.

"The belief "this time it is different" is all set to get a rude shock."

Spot gold looks neutral in a range of US$1,311-US$1,329 per ounce, and an escape could suggest a direction, according to Reuters technical analyst Wang Tao.

Meanwhile, the holdings in the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.35 per cent to 828.96 tonnes on Wednesday from Tuesday. Holdings fell for a second straight day on Wednesday.

Among other precious metals, spot silver rose 0.4 per cent to US$17.01 an ounce. Prices fell to the lowest in nearly two weeks at US$16.86 on Wednesday.

Platinum rose 0.2 per cent to US$973.10 an ounce, after touching the highest in nearly four months of US$974 in the prior session.

Palladium rose 0.5 per cent to US$1,088 an ounce, after seeing its worst one-day fall in over a month on Wednesday.

Palladium, which rose to a record of US$1,111.40 on Tuesday, fell 1.5 per cent in the previous session.

REUTERS