Gold climbs on weak dollar but oil dip caps gains

LONDON - Gold was higher on Thursday, having rallied 2 percent earlier in the session as the dollar weakened, but gains were capped by a sharp drop in oil prices.

By (Reuters)

Published: Thu 31 Jul 2008, 10:03 PM

Last updated: Sun 5 Apr 2015, 1:05 PM

Gold climbed to $917.40/918.40 an ounce at 1436 GMT from $907.20/908.40 an ounce late in New York on Wednesday.

Traders are awaiting key U.S. data, including U.S. non-farm payrolls numbers due on Friday afternoon, to set fresh direction to trade.

'The employment numbers are always the biggest piece of data out,' HSBC analyst Jim Steel said. 'That is going to be a determining factor tomorrow.'

Gold prices rallied sharply earlier in the session as the dollar slipped after data showed an unexpected rise in U.S. weekly jobless claims, and as second-quarter GDP numbers came in softer than expected.

European Central Bank sources also told Reuters on Wednesday that the ECB will raise interest rates again if inflation keeps rising, despite faltering economic growth.

The precious metal touched a session high of $925.20 as investors bought into gold as an alternative to the dollar.

However, a sharp drop in oil prices to below $125 a barrel knocked gold from its earlier highs. Bullion typically moves in line with crude, as it is often bought as a hedge against oil-led inflation.

'The only reason gold is off the high is because of this sudden weakness in oil,' noted Steel.

PGMs recover

Platinum and palladium, both largely used by carmakers as a component in autocatalysts, ticked up on Thursday, having slipped in gold's wake in the previous session.

Spot platinum rose to $1,744.00/1,764.00 an ounce from $1,725.00/1,745.00 late in New York on Wednesday.

'The slump in platinum has brought out the buyers and the metal has found support in the low $1700s/oz,' said UBS analyst John Reade in a note.

'We believe that platinum is now attractively priced and that investors looking to buy good amounts should scale into platinum at current levels.'

Spot palladium rose to $377.50/385.50 an ounce from $371.50/379.50 late in New York. Silver climbed to $17.72/17.79 an ounce from $17.50/17.56.

The iShares Silver Trust, the largest physically-backed silver exchange-traded fund traded in New York, said its holdings rose above 200 million ounces for the first time on July 29.

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