Gold prices rose for a third day to the highest in two weeks on Wednesday, as a rate hike in China put inflation concerns back in the spotlight, and as worries over eurozone debt stoked safe haven buying. After rising in tandem with oil and grains a day ago, gold rose on Wednesday despite mild losses in other commodities, shrugging off a stronger dollar as broad risk-aversion pushed prices toward the top of the market's two-month trading range.
Spot gold's bid rose to $1,530.54 an ounce by 12:16 p.m. EDT (1616 GMT), against $1,515.70 late in New York on Tuesday. US gold futures for August delivery was $18.7 an ounce higher at $1,531.40 an ounce, a 1.24 percent increase. Overnight, China's central bank increased interest rates by 25 basis points, its third increase this year, making clear that taming inflation is a top priority even as economic growth slows modestly.
"China has done a number of reserve requirement increases over the last several months - however, you have climbing inflation, so in real terms you are not making any money by just holding cash," said VM Group analyst Carl Firman. The metal was also taking support from concerns over eurozone debt after Moody's cut Portugal's credit rating to junk status, and an upcoming debate on raising the US debt ceiling.
Traders are closely watching the European Central Bank's policy meeting on Thursday. The bank is set to lift eurozone interest rates to 1.5 percent and to show no sign of softening its stance that Greece must not default on its debts. "We see resistance at $1,518 and $1,528 which represent the 50 percent and 61.8 percent of our June drop from $1,558 to $1,479," said ScotiaMocatta in a note.
On the supply side of the market, investors were awaiting fresh developments in a strike in Freeport-McMoran's Indonesia mine as well as the threat of a strike in South Africa's main gold mines. Silver was higher at $36.10 an ounce against $35.45, spot platinum eased to $1,734.50 an ounce from $1,737.05, and spot palladium edged up to $771.47 an ounce from $770.38 on Tuesday.