Gold hit a two-week high on Wednesday as the dollar weakened amid uncertainty over the timing of a US interest rate increase. Spot gold gained 0.6 percent to $1,269.56 an ounce at 1357 GMT, after earlier touching its highest since October 5 at $1,272.17. US gold futures rose $8.30 to $1,271.10 an ounce. Spot prices had shed about 7 percent over the past three weeks, as markets re-priced the likelihood of a Federal Reserve's rate hike in December.
"Technically, gold is well supported above $1,250 an ounce ... today's push in the $1,270 area is a positive signal ahead of the US elections and the possible Fed rate hike in December," ActivTrades chief analyst Carlo Alberto De Casa said. The metal is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets.
The dollar was down 0.1 percent against a basket of six main currencies, even as data on Wednesday showed that US single-family starts surged in September, pointing to sustained housing market strength. A drop in the construction of multifamily dwellings, however, pushed overall home building activity to a 1-1/2-year low.
Fed fund futures imply around a 65 percent probability of the Federal Reserve raising interest rates by December, down from 70 percent. The change was seen after US consumer prices data on Tuesday showed a moderation in underlying inflation. "The market is keeping an eye on the potential rate hike in December, which we don't expect because once we get close to the meeting, the Fed will see that key figures are not doing well enough to justify another rate hike and there will be some support for gold," said Danske Bank senior analyst Jens Pedersen. A European Central Bank's policy meeting on Thursday will also be monitored by markets, Pedersen said. Spot silver was up 0.1 percent at $17.61 an ounce. Platinum rose 0.1 percent to $941 an ounce and palladium gained lost 0.2 percent to $637.50 an ounce.
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