Gold rose for a third session on Thursday, boosted by hopes of more monetary easing after European Central Bank President Mario Draghi pledged to do whatever was necessary to protect the euro zone from collapse. The metal briefly climbed over 1 percent, lifted by a rally on Wall Street after Draghi's remarks reassured the equities market which expects the US Federal Reserve to explore new tools to boost growth amid signs of economic slowdown.
"Fundamentally, gold is definitely improved big time this morning because of comments by Draghi to save the euro, which basically means he's going to print money," said Adam Sarhan, chief executive of Sarhan Capital. "If he prints money, that means gold is going higher."
Gold briefly broke above its 100-day moving average at $1,615.60 an ounce earlier in the session, marking the first time bullion breached that level since May 1. Options-related buying also helped boost underlying gold futures as COMEX August options will expire at Thursday's market close.
"Right now gold is testing resistance. If we can break above it, we will get another leg higher," said Sarhan. He added that gold is approaching a key inflection point at $1,660 an ounce based on a downward-sloping curve connecting recent highs on weekly charts.
Spot gold was up 0.7 percent at $1,614.66 an ounce by 11:35 a.m. (1535 GMT), having earlier reached a three-week high at $1,621.41. US gold futures for August delivery were up $5.70 an ounce at $1,613.80, with trading volume about 25 percent above its 30-day average, preliminary Reuters data showed. The higher-than-usual volume was partly skewed by option expiration.
Sharper appetite for risk and losses in the dollar versus the euro as a result of the Draghi comments also boosted buying of US equities and other commodities, and that underpinned gold. The S&P 500 index rose about 1 percent. Further monetary stimulus would maintain pressure on long-term interest rates, keeping the opportunity cost of holding gold at rock bottom, and boosting concerns over inflation much further down the track.
HSBC analyst James Steel said that gold investors are now looking ahead to Friday's second-quarter US GDP data. Gold may take its next cue based on expectations of Fed stimulus and movements in the US dollar and equities markets after the economic indicator.
The world's largest gold-backed exchange-traded fund SPDR Gold Trust reported a 2.1 tonne outflow on Wednesday. The fund saw its biggest weekly outflow of physical metal this year last week. Silver climbed 0.9 percent to $27.57 an ounce, while platinum was up 0.9 percent at $1,403.74 an ounce and spot palladium rose 0.6 percent to $565.20 an ounce.