Gold swings higher as US dollar surrenders gains

[NEW YORK] Gold rose on Thursday, snapping four sessions of losses as the US dollar surrendered early gains, though the metal remained lower for the week to date and analysts said they expected trading to be rangebound.

The dollar slipped against a basket of major currencies , as its rally from a three-year low last week ran out of steam. The yen soared as volatility in financial markets led investors to favor the Japanese currency.

Spot gold gained 0.6 per cent at US$1,331.56 per ounce by 1.35pm EST (1835 GMT), bouncing off a session low of US$1,320.61 but still down 1.2 per cent so far this week. US gold futures for April delivery settled up 60 cents, or 0.1 per cent, at US$1,332.70 per ounce.

"We're seeing a little bit of a weaker dollar as the euro is up a bit. Currencies across the board are higher than the dollar," said Chris Gaffney, president of world markets at EverBank.

Analysts said they expected gold to remain rangebound, citing Wednesday's release of the latest Federal Reserve minutes which showed US central bank policy makers remained worried about inflation and committed to hiking interest rates.

While inflation worries could spur safe-haven buying of gold, rising interest rates would pressure the metal because bullion pays no interest.

"The general tone of the FOMC minutes was hawkish and convinced about the strength of the US economy and that the inflation target will be reached," said Commerzbank analyst Carsten Fritsch.

"This was seen as a further sign that Fed is willing to increase interest rates further and more than expected." However, some analysts said concerns about rising inflation may be tempered by caution over recent market volatility.

Since inflation is poised to surpass the US Federal Reserve's target this year, investors will likely use gold as an inflation hedge, Mr Gaffney added.

"That will continue to keep gold in a fairly narrow range; the push and pull of interest rates and inflation."

A break of the US$1,322-25 area, however, could see gold test the 50-day moving average of US$1,319.25 then the 100-day moving of US$1,298.50 if dollar strength persists, MKS said in a note.

Among other precious metals, silver rose 0.6 per cent at US$16.58 an ounce, palladium was up 1.8 per cent at US$1,038.70 and platinum gained 0.7 per cent at US$993.50, rising from a one-week low of US$980.

REUTERS