Gold rose almost one percent on Wednesday, as the dollar remained under pressure after mixed US data and political turmoil in Egypt and Portugal triggered safe haven buying. Volumes thinned as traders were reluctant to take big positions ahead of the US Independence Day holiday on Thursday and key US nonfarm jobs data on Friday.
Spot gold rose as much as 1.5 percent to a session high of $1,259.60 an ounce earlier and was at $1,252.91 an ounce at 2:55 pm EDT (1855 GMT), up 0.93 percent. US gold futures for August delivery settled up $8.5 at $1,251.9 an ounce. "Today's strength is more to do with the dollar and equities markets after bad euro zone data, mixed US numbers and renewed worries about Portugal and Greece," VTB Capital analyst Andrey Kryuchenkov said.
"It would be very bad for gold if you get a non-farm payrolls number good enough for the Fed to taper but at the same time not strong enough to see any inflationary pressure coming through," BofA Merrill Lynch analyst Michael Widmer said. Gold has jumped 7 percent after hitting $1,180, its lowest price in almost three years, last Friday, but many traders view the gains as little more than a "dead-cat bounce," slang for a small but temporary rally that follows significant declines.
Sentiment remained guarded however as outflows from exchange-traded funds (ETFs) continued and physical demand failed to pick up after prices plumbed a three-year low of $1,180.71 on Friday. Holdings of the world's largest gold-backed exchange-traded fund SPDR Gold Trust fell 0.37 percent to 964.69 tonnes on Tuesday, hitting fresh lows since February 2009. Silver tracked gold's gains, up 2 percent to $19.74 an ounce. Platinum fell 1.6 percent to $1,341.75 an ounce and palladium slipped 0.17 percent to $682.72 an ounce.