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Gold extended gains for a second session on Wednesday, as a softer dollar increased its appeal as a hedge, with investors awaiting stronger clues on when the Federal Reserve will raise US rates.
Spot gold rose 0.1 per cent to $1,177.20 an ounce by 0211 GMT. The metal had gained 0.5 percent in the previous session, snapping a three-day losing streak.
ECB monetary easing
Bullion gained as the euro rose against the dollar on Tuesday, bolstered by solid regional economic data and comments from the European Central Bank (ECB) officials suggesting further monetary easing may not be imminent.
A weaker greenback makes dollar-denominated gold cheaper for holders of other currencies, while also increasing its appeal as a hedge. Sluggishness in equity markets also triggered some safe-haven bids for gold.
With gold now above its 200-day moving average near $1,175, some expect more gains though trading could be quiet ahead of the ECB policy meeting on Thursday and Fed meeting next week.
Bullion’s rise above its 200-day moving-average “is a technical sign, no doubt, suggesting some upside risk for gold’’, said OCBC analyst Barnabas Gan.
“(But) a potential higher interest rate environment, better growth story into 2016, are strong fundamental drivers underpinning a bear gold story going forward,’’ Gan said.
Others also predicted a short-term rise in prices. Reuters technical analyst Wang Tao said gold may rise to $1,190 as it has cleared a resistance at $1,177.
Despite the overnight gains, gold was still trading below a 3-1/2-month high of $1,190.63 hit last week, held back by uncertainty over the timing of the first US rate hike in nearly a decade.
Market expectations for a hike have shifted to next year in recent weeks amid concerns about the global economy, although some haven’t completely ruled out a rate rise in December on recent robust US economic data.
US housing starts
Data on Tuesday showed US housing starts rose solidly in September on soaring demand for rental apartments, a sign that the housing market continues to steadily improve.
Investors will be closely monitoring US data and comments from Fed officials on monetary policy to gauge when the central bank would raise rates. The Fed holds two more policy meetings this year: next week and in December.
Gold prices are expected to slip to $1,159.88 by October 2016, delegates to the London Bullion Market Association’s annual gathering had predicted on Tuesday.
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