Gold rose 1 percent on Wednesday, climbing further from this week's 15-month low, as equities fell for a second day after a cut in the International Monetary Fund's global growth forecasts fuelled concerns over the world economy. The metal plunged to its lowest since mid-2013 earlier this week at $1,183.46, after upbeat US jobs data boosted the dollar and stocks and buoyed expectations that the Federal Reserve will keep scaling back its ultra-loose monetary policy.
It has since rebounded as stock markets have lost traction and the dollar has retreated from highs. Spot gold was up 0.7 percent at $1,217.20 an ounce at 1411 GMT, having earlier touched a high of $1,220.60. US gold futures for December delivery were up $4.90 an ounce at $1,217.30.
European stocks hit 2-month lows on Wednesday and world share indexes pushed back towards their lowest in six months, while German bond yields slid towards record lows as concerns over global growth spurred demand for safe-haven debt. Gold also outperformed crude oil, which fell to its lowest in more than two years on Wednesday.
"Gold is actually holding up very nicely compared to a lot of other commodities at the moment," Natixis analyst Nic Brown said. "You can look at that and say, actually, the market is beginning to price a global economic slowdown, in that you have gold outperforming the big energy products." Markets will be eyeing minutes of the Fed's last policy meeting due later on Wednesday for clues on when the US central bank could raise rates. Higher rates would dent demand for gold, a non-interest-bearing asset.
As Chinese markets returned from a one-week holiday on Wednesday, traders said the metal could benefit from fresh physical demand. Bullion investors were keenly watching the Shanghai Gold Exchange to gauge buying interest in China, the top consumer of the metal. Premiums on the exchange, the platform for all physical trades in China, were about $5-$6 an ounce above global spot prices on Wednesday, compared with about $3 before Chinese markets closed for the holiday.
"Ultimately what matters is what consumers and market participants in China think gold prices will do from here," UBS said in a note on Wednesday. "The view that gold is currently trading near the bottom would encourage buying, while expectations of further downside would keep buyers on the sidelines to wait for more attractive prices." UBS added, "The sense we are getting is that while investors are likely to have more mixed views, consumers who are faced with a local gold price which is 13 percent below the peak this year may be finding value here." Silver was up 1.1 percent at $17.27 an ounce, while spot palladium was up 1.9 percent at $793.50 an ounce and spot platinum was up 1.7 percent at $1,273 an ounce. Platinum tumbled to a five-year low at $1,183.25 on Monday as gold prices weakened but has since seen a solid rebound. It is currently up 4.5 percent this week, and is on track for its biggest weekly rise in a year if those gains are sustained.
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