Gold recovers after firm dollar drives it to 1-week low

By Maytaal Angel

LONDON (Reuters) - Gold prices edged up on Thursday after hitting the lowest level in more than a week, driven down by a firm dollar, that dented demand for dollar-priced gold, and by soaring stock markets.

The dollar index was broadly steady against a basket of major currencies, having spiked briefly overnight after 10-year U.S. Treasury yields rose on rate hike expectations and investor risk appetite.

World stock prices, which often trade counter to gold, set fresh record highs before stalling in Europe on nervousness over political turmoil in Spain, the eurozone's fourth largest economy.

"There's technical reasons why we've stabilised (plus) stocks have come off (but overall) people are not finding much value investing in gold at the moment," said Fawad Razaqzada, analyst at FOREX.com

"The lack of safe haven demand combined with expectations of higher interest rates is weighing on gold. If gold remains below $1,300 there's a risk of a deeper correction in the coming days or weeks."

Spot gold rose 0.4 percent to $1,285.40 an ounce as of 1017 GMT after earlier hitting its lowest since Oct. 9 at $1,276.22. The precious metal has lost 6 percent since September 8.

U.S. gold futures for December delivery rose 0.3 percent at $1,287.40.

The term of current Fed Chair Janet Yellen's expires in February and investors are keen to see who U.S. President Donald Trump will pick as her replacement. The White House said Trump would announce his decision in the "coming days".

"Depending on how the dollar goes, we might look at $1,250-60 as the next stop for gold to trade down. We don't see an immediate upward catalyst for gold except for North Korea," said Richard Xu, a fund manager at China's biggest gold exchange-traded fund, HuaAn Gold.

Higher interest rates tend to boost the dollar and push up bond yields, putting pressure on gold by increasing the opportunity cost of holding non-yielding bullion.

U.S. interest rates futures saw modest losses on Wednesday after the release of the Fed's Beige Book, but traders still saw an 80 percent chance of the U.S. central bank raising rates in December.

"Looks like fundamentally the (U.S.) economy is doing pretty well, so that will also put downward pressure on gold," Xu said.

Silver rose 0.4 percent to $17.10 an ounce, platinum rose 0.8 percent to $925 and palladium climbed 0.7 percent to $960.50.

Platinum and palladium hit one-week lows earlier.

Palladium rallied to a 16-year high this week and may spike further on rising auto sales in China and as consumers replace vehicles damaged by hurricanes in the United States.

(Additional reporting by Apeksha Nair in Bengaluru; Editing by Greg Mahlich)