Gold prices rose for a third straight session on Wednesday to hit a one-week high, buoyed by a weaker dollar, while investors awaited US inflation data for clues on the pace of future US interest rate increases.
Spot gold was up 0.2 per cent at $1,332.01 an ounce, as of 0745 GMT. Earlier in the session, it hit $1,336.86, its highest since Feb. 6.
US gold futures rose 0.3 per cent to $1,334.7 per ounce.
The dollar index was down 0.1 per cent against a basket of currencies at 89.590, after touching a one-week low of 89.378.
A retreat in the greenback helped the bullion – which is priced in dollars – gain over 2 per cent from a one-month low of $1,306.81 hit last week.
“With the US dollar once again striking a bearish chord, the long gold set up looks favourable,” said Stephen Innes, head of trading APAC at OANDA.
“However, with nearly 100 per cent of gold appeal trading off the back of US dollar weakness, the US CPI (consumer price index) reading could be a day of reckoning for gold bulls,” Innes added.
The market on Wednesday looked forward to US inflation report for the month of January, due for release later in the day, which could soothe, or incite, concerns of faster rate hikes globally.
Inflation can boost demand for safe-haven assets such as bullion, which tends to gain in times of crisis. However, expectations that the US Federal Reserve will hike interest rates to fight inflation make the non-yielding metal less attractive.
“Recent price action is indicative of short-term positioning, with expectations of strength toward $1,335 – $1,340 as short positions are further tested,” MKS PAMP Group trader Sam Laughlin said.
“The caveat to a short-term push higher, however, is the upcoming Chinese New Year holiday, which will remove physical demand from the market.”
Spot gold is expected to edge up into a range of $1,343-$1,352 per ounce, as suggested by a retracement analysis, Reuters technical analyst Wang Tao said.
Meanwhile, holdings of SPDR Gold Trust , the world’s largest gold-backed exchange-traded fund, rose 0.36 per cent to 823.66 tonnes on Tuesday, following their worst weekly fall since July 30.
Among other precious metals, silver rose 0.3 per cent to $16.59 per ounce. Platinum was up 0.2 per cent at $976.10, while palladium gained 0.2 per cent to $986.49 per ounce.
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