Gold rose early on Thursday, as investors covered short positions after a sharp two-day pullback, and a crude oil rally also buoyed the precious metal that sank early this week when investors grew pessimistic about further US monetary easing. Bullion rebounded from its biggest two-day drop in a month after it steadied above key technical resistance at $1,600 an ounce where investors had placed heavy put options to protect against further losses.
Trading volume was thin ahead of Friday's US nonfarm payrolls report and the Good Friday holiday in Western markets. Gold remained on track for a weekly decline exceeding 2 percent after minutes of the latest Federal Reserve policy meeting doused hopes for further US monetary stimulus.
Market watchers said some hedge funds might have reduced gold holdings due to stronger US economic data and easing of fears about European debt. "A lot of the gold trade by hedge funds was specifically tied to a new round of Fed stimulus," said Jeffrey Sica, chief investment officer of SICA Wealth Management with more than $1 billion in assets.
"If there is any perception that momentum in gold will taper, hedge funds will take the opportunity to sell. Gold is always vulnerable because of how well it has done," he said. Spot gold was up 0.6 percent at $1,628.21 an ounce by 1:47 pm EDT (1747 GMT). Gold briefly broke back above $1,630 an ounce as a drop in US weekly initial jobless claims pulled the dollar from its highs and stocks from their lows, but was unable to sustain the move.
US gold futures for June delivery settled up 1 percent at $1,630.10 an ounce, with trading volume about halved of its 30-day average, preliminary Reuters data showed. Among other precious metals, spot silver was up 1.3 at $31.72 an ounce, spot platinum edged up 0.2 percent at $1,595.94 an ounce, and spot palladium gained 1.8 percent at $640.70 an ounce.