Gold rose on Wednesday to snap a two-day losing streak, as the dollar fell on lingering uncertainty about the scope and timing of the Federal Reserve's eventual tapering of its bond-buying programme. After having earlier hit a three-week low, the metal staged a $13, or 1 percent, rebound on a combination of the drop in the US currency, lower US Treasury bond yields and a weaker US equities market.
However, gold prices could resume falling on the Fed's recent indication it would begin tapering its $85 billion monthly bond purchases as early as September if the US economic recovery retained momentum, analysts said. "We anticipate improving economic data, especially from the United States and Europe in coming months, may renew pressure on gold prices," said Robert Haworth, senior investment strategist at US Bank Wealth Management.
Spot gold was up 0.5 percent at $1,287.47 an ounce by 3:01 pm EDT (1901 GMT), having earlier hit its lowest level since July 17 at $1,272.64 earlier in the session. US gold futures for December delivery settled up $2.80 at $1,285.30 an ounce, with trading volume about 45 percent below its 30-day average, preliminary Reuters data showed.
The US central bank could soon begin reducing the pace of its bond-buying stimulus if recent improvement in the US job market persists, the president of the Cleveland Fed, Sandra Pianalto, said on Wednesday. On the gold options front, the greater popularity of bearish bets over bullish ones suggests that the precious metal is more likely headed for another tumble instead of a sharp rally, option traders said. Among other precious metals, silver was up 0.5 percent to $19.58 an ounce. Platinum rose 0.8 percent to $1,435.99 an ounce and palladium fell 0.2 percent to $722 an ounce.
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