Gold climbed on Thursday, probing towards $940, as its inverse correlation with the dollar gave way to short covering after a surprise rise in US jobless claims damped risk appetite. Spot gold stood at $938.10 per ounce at 1630 GMT, up from $931.10 quoted late in New York on Wednesday. The metal briefly hit a high of $939.20 earlier in the session.
US weekly jobs data surprised to the downside, as the number of workers filing claims for jobless benefits unexpectedly rose, easing pro-risk plays and encouraging flows into the dollar. The precious metal has moved some way off Monday's low of $912.90, garnering support above $930 per ounce. Rising crude prices also boosted its credentials as a potential hedge against oil-induced inflation.
"We've backed away from lower levels near $915 and I suspect we're seeing a bit of short covering, It just looks like the market has got itself a bit too short," said Ole Hansen, an analyst with Saxo Bank. Analysts also said however that investors had taken support from the US Federal Reserve's post-policy meeting statement that offered no hint of changes to its programme of quantitative easing.
Low US interest rates are seen as potentially bearish for the dollar from a yield perspective, raising the appeal of dollar-denominated gold for non-US investors. US gold futures for August delivery gained slightly to $934.50 an ounce. Analysts said that while fundamental demand for gold remained weak, the metal was still finding support from the widespread view that the dollar would stay on the back foot.
"There are a couple of reasons to be negative - ETF flows are not particularly supportive for gold at the moment, and Indian imports are down," said Dan Smith, an analyst with Standard Bank. Underlining a lack of aggressive buying, holdings by the world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, remained at 1,131.24 tonnes on Wednesday, unchanged since Monday.
Earlier on Thursday the head of the economic department of the Communist Party policy research office in China said the country should buy more gold, and that purchasing land in the United States was a better option for China than buying US treasuries. In other precious metals, spot silver firmed to $13.96, against $13.83 quoted late in New York on Wednesday, while platinum climbed to $1,180.00, against $1,156.00 and palladium was stronger $236.50 from $233.50.