Gold jumps over 1 percent as dollar backs off from multi-month highs

By Karthika Suresh Namboothiri

BENGALURU (Reuters) - Gold rose more than 1 percent on Thursday, bouncing off a three-week low touched in the previous session as the dollar retreated from recent highs, making the metal cheaper for holders of other currencies.

Spot gold gained 1.5 percent at $1,232.09 per ounce by 12:32 p.m EDT (1632 GMT). U.S. gold futures were up 1.6 percent at $1,233.90 an ounce.

"Today's move is largely a reaction to dollar weakness and that naturally is an opportunity for gold prices to move higher," said Marcus Garvey, commodities strategist at ICBC Standard Bank.

The dollar index, which measures the U.S. unit against a basket of six major currencies, fell 0.7 percent, dropping from a 16-month high hit in the previous session on continued U.S. economic strength. [USD/]

Federal data on Thursday showed new applications for U.S. unemployment aid fell last week and the number of Americans receiving benefits was the lowest in more than 45 years as labor market conditions tightened further.

The economy's upbeat outlook was, however, tempered by news that manufacturing activity slowed in October as a measure of new orders dropped to its lowest level in 1-1/2 years.

Investors will focus on Friday's non-farm payrolls data for further clues on the strength of the U.S. economy.

Markets are also watching the U.S. congressional elections on Nov. 6, which will determine whether the Republican or Democratic party controls the U.S. Congress, with some predicting increased market volatility on the outcome.

Gold fell in the three previous sessions and touched its lowest since Oct. 11 on Wednesday at $1,211.52 per ounce.

"Traders stepped in to buy the dip in gold prices on some perceived bargain-hunting and by some short-covering from the futures traders," Kitco Metals senior analyst Jim Wyckoff said in a note.

"Precious metals are seeing buying interest as the U.S. dollar index is posting sharp losses today."

Among other precious metals, platinum climbed 2.8 percent to $859.40 per ounce, having touched its highest since June 27 at $860.90 earlier in the session.

Silver jumped 3.5 percent to $14.72 per ounce, while palladium rose 1.5 percent to $1,094.10.

(Reporting by Swati Verma, Sumita Layek and Karthika Suresh Namboothiri in Bengaluru; Editing by Dan Grebler)