Gold rose 1 percent on Thursday, as a weaker dollar and technical buying lifted the metal after three straight days of losses, but disappointment over Federal Reserve easing could still pressure the metal. Gold has taken to follow riskier assets after the S&P 500 index hit 1,400 for the first time in four years, as a strong run of US employment and manufacturing data confirmed a decent pace of economic recovery.
The near 5 percent or $80 per ounce slide over last three days has removed the premium gold enjoyed based on expectations of further US monetary easing to stimulate the economy, after the Fed said in late January it would keep interest rates for the next several years. "For a market that sells off five percent that doesn't normally come off that aggressively, people look to buy it for a trading opportunity," said Fred Schoenstein, a trader at Heraeus Precious Metals Management.
However, Schoenstein said he expects more near-term weakness, as Thursday's rally was mostly driven by short covering and bargain hunting after gold's steep losses. Spot gold rose 1.2 percent to $1,661.70 an ounce by 1:55 pm EDT (1755 GMT). It is still heading for a loss of about 3 percent for the week, its second biggest weekly loss for the year and a third consecutive weekly drop.
US gold futures for April delivery settled up $16.60 at $1,659.50 an ounce, with volume above its 30-day average but sharply below the pace in the previous session. With bullion now trading well below its 200-day moving average, gold appears to find support after initially falling toward $1,625 an ounce, an area near its lows in mid-January, analysts said.
Some funds appear to have closed out of their bullish gold bets, fearing the Fed could be done with quantitative easing after the Fed earlier this week upgraded its economic outlook and offered few clues to further easing following a string of improved US economic data.
Investors have stuck with gold for now, pushing holdings of the metal in the world's largest exchange-traded products (ETPs) to record highs this week, while in Asia's purchasing hot-spots, the drop in price encouraged a revival in demand, particularly in top consumer India. In other precious metals, silver was up 2 percent on the day at $32.75 an ounce. Platinum was up 0.8 percent at $1,683.33 an ounce, pushing the premium to gold to over $20 an ounce. Palladium was up 1.1 percent at $702 an ounce.