Gold jumped to a fresh two-week peak on Tuesday, moving closer to the key $1,200-an-ounce level, as a softer dollar increased its appeal as a hedge.
The dollar slipped against a basket of major currencies as the euro recovered from losses fuelled by prospects of further stimulus by the European Central Bank. A weaker greenback makes dollar-denominated gold less expensive for holders of other currencies.
“Movements in the dollar continue to be the major catalyst for moves in gold, with sharp rallies predominantly the result of short-covering,’’ MKS Capital trader James Gardiner said.
“There should be initial support on the downside around $1,181-82, and on the topside $1,200 will be the key resistance.’’
Spot gold rose 0.8 per cent to $1,195.50 an ounce, its highest since October 31. US gold futures jumped 1 per cent to $1,195.70, also a two-week high.
Gold had dipped earlier in the session as the dollar was boosted by US economic data showing that while the US manufacturing output rose only modestly, factory activity rebounded in New York State.
SPDR Gold Trust
Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.33 percent to 723.01 tonnes on Monday, the first increase since November 3.
In a reflection of investor sentiment, however, holdings in the fund — which marks its tenth anniversary on Tuesday — were still near a six-year low. The ETF counts hedge fund Paulson & Co as its top investor.
Curbs on gold imports
Elsewhere, India's central bank is in talks with the government to increase curbs on gold imports and an announcement could come as early as Tuesday, a Finance Ministry source said.
More curbs could hit demand from India, the second biggest gold consumer, and add pressure on gold prices.
In top consumer China, local prices held steady at a premium of $2-$3 an ounce, as buying picked up on steadier prices. Sustained robust buying could support prices.