Gold prices rose back above $1,740 an ounce on Tuesday, recovering from the previous session's one-month low, as a weaker dollar, stronger stock markets and lower prices tempted buyers back to the metal. The euro and equity markets rose as hopes that debt-laden Spain will soon seek a bailout added to firm German and US economic data and solid corporate results to sharpen appetite for assets seen as higher risk.
Spot gold was up 0.34 percent at $1,742.40 an ounce at 1343 GMT, well off the previous day's one-month low at $1,728.75, while US gold futures for December delivery were up $7.00 an ounce at $1,744.60. The metal has been underpinned by expectations that stimulus measures from central banks including the Federal Reserve will keep interest rates low and fuel inflation in the longer term.
Data on Tuesday showed US consumer prices rose in September as the cost of gasoline surged, but faster inflation looked unlikely to derail the Fed's policy path. "Particularly for investors and central banks, the incentives to buy gold are still there," Credit Suisse analyst Tobias Merath said. "Quantitative easing, low interest rates, counterparty risk concerns, all these factors are in place, and investment interest is definitely there.
Gold prices fell more than 1 percent on Monday after firm US retail sales data, coupled with well-received jobless and consumer confidence reports the previous week, led to questions over how far the Fed's latest stimulus programme will extend. Holdings of bullion exchange-traded funds tracked by Reuters fell by 213,228 ounces on Monday, due to an outflow from the largest gold ETF, New York's SPDR Gold Trust.
The largest silver ETF, the iShares Silver Trust also recorded an outflow of 290,558 ounces on Monday. ETFs, which issue securities backed by physical stocks of precious metal, have proved a popular way to invest in bullion in recent years. From a chart perspective, gold is looking vulnerable after its drop back below its late September low at $1,737.50, according to analysts who study past price moves to determine the future direction of trade. Support is expected to hold firm at the metal's earlier September low near $1,720 an ounce.
ScotiaMocatta analysts said in a note that gold will have to beat resistance at $1,758, and close above that level, to relieve downside pressure. Among other precious metals, silver was up 0.6 percent at $32.90 an ounce. On Monday it hit its lowest since September 12 at $32.53 an ounce.
"The break below $33.30 (on Monday) in silver proved our near-term bullish view wrong," Barclays Capital said in a note. "Risk is for a dip toward $31.00 before basing." Spot platinum was up 0.1 percent at $1,636.99 an ounce, while spot palladium was up 1 percent at $635.97 an ounce.
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