Gold edges higher as dollar rally takes a breather

By Peter Hobson

LONDON (Reuters) - Gold prices rose on Wednesday from an 11-day low in the previous session as a U.S. dollar rally faltered.

Gold has fallen 1.5 percent from an Aug. 28 high as currency weakness in emerging markets and concerns over global trade disputes strengthened the dollar, making bullion more expensive for buyers with other currencies.

But the greenback slipped on Wednesday after a report that Britain and Germany were prepared to drop a key sticking point in Brexit negotiations boosted the pound and the euro.

And with gold still close to a 1-1/2 year low of $1,159.96 an ounce touched last month, there is little room for prices to fall, Julius Baer analyst Carsten Menke said.

"Gold is showing signs of bottoming," he said.

Spot gold was 0.5 percent higher at $1,196.51 at 1409 GMT after falling to $1,189.20, the lowest since Aug. 24, on Tuesday.

U.S. gold futures were up 0.3 percent at $1,202.30 an ounce, with the dollar down 0.3 percent against a basket of major currencies.

Gold has tumbled more than 12 percent from a peak in April as the dollar rose to 14-month highs and investors turned against the metal.

Helping drive prices down, holdings of gold by exchange traded funds have fallen by 8 percent, or 4.6 million ounces, since late May, while bets by hedge funds and money managers on lower prices on the Comex exchange exceeded bets on higher prices by the most on record last month.

Such negative positioning means speculators will struggle to push prices much lower, Menke said, though he added that without a weakening of the dollar, gold would find it difficult to rise.

Trade concerns continue to support the greenback, however, with a deadline looming in the U.S.-China trade dispute and a refusal by Canada to back down on key demands in its trade talks with Washington.

Technical and momentum indicators were positive for gold, but the technical picture would remain mixed unless it could close above $1,200.70, analysts at ScotiaMocatta said.

Fibonacci resistance was at $1,213.20 with support at $1,185.30, they said.

In other precious metals, spot silver was up 0.7 percent at $14.18 after falling to its lowest since January 2016 at $13.97 in the previous session.

Platinum gained 0.5 percent to $779.90 having hit$761.80, the lowest since Aug. 16, on Tuesday.

Palladium was up 0.3 percent at $982.45 after touching the highest in 11 weeks at $988.47 on Tuesday.

(Additional reporting by Nallur Sethuraman in Bengaluru; Editing by Alexander Smith and David Evans)