Gold rose for a third straight day Wednesday on a weaker dollar and strong Asian physical demand, while an improving global economic outlook took platinum and palladium to multi-year highs. Silver was flat after initially rallying 2 percent on news that sales of US Mint American Eagle silver coins rose to a record in January. Dealers attributed the Mint's surging sales to investors betting on strong industrial demand for silver and seeking exposure to precious metals.
Physical demand in Asia underpinned gold prices.
"The broader concerns driving gold prices still remain intact," said Barclays Capital analyst Suki Cooper. "Given that we're now in the run-up to the Lunar holidays, we have seen some strong physical demand materialising in China and reports about bar premiums trading at two-year highs and mint shortages, so there's good physical demand on the downside providing a cushion to prices," Cooper said. Spot gold climbed 0.2 percent at $1,370.77 by 1:46 pm EST (1846 GMT), while US gold futures gained $2.3 to $1,370.50.
Gold's safe-haven demand rose as US stocks fell after Goldman Sachs, Wall Street's most influential bank, posted a decline in profit. Gold, which rose 30 percent last year, has fallen more than 3 percent this month as investors took profits and put more cash into assets such as equities and industrial commodities.
This week, gold pared some losses, although many analysts say rising interest rates and better growth figures could lead gold to more declines in the weeks to come. Gold's inverse correlation to the dollar index has eroded in the past two weeks, as the bullion price has moved more frequently in lockstep with the US currency.
Asian buying underpinned the market, meaning gold is likely to trade in a range between $1,370 and $1,378, with a possibility of breaching the upside, said Darren Heathcote, head of trading at Investec Australia. Premiums for gold bars are at their highest in two years right now, boosted in large part by Chinese buying ahead of the Lunar New Year in February.
Platinum rallied to its highest since July 2008, taking heart from the strength in global equities and other industrial commodities. Both platinum and palladium have seen strong fund interest since the start of the year, based on expectations for robust growth in emerging economy car markets and an improvement in the European auto industry.
Heavy rainfall in South Africa, the world's largest producer of platinum, has affected coal supply to power plants and once again raised the potential for disruptions to platinum output, which has lent additional support to the price. Spot platinum rose to $1,845.50 an ounce, its highest since July 2008, before easing to show a 0.5 percent gain on the day at $1,832.24. Palladium held close to a ten-year high, rising 1 percent to $818.47.