Gold rises as global growth concerns spark safe-haven bids

Gold extended gains to a third session on Wednesday as growing concerns over the global economy prompted safe-haven bids, while the return of top consumer China from a week-long holiday also lifted prices.

Other safe-haven assets such as bonds and the Japanese yen also got a boost as Asian stocks fell and oil prices were mired near their lowest in more than two years.

"For the moment, it does look like gold could see some more upside due to the risk averse sentiment," said a precious metal trader in Hong Kong. "But I would still bet that prices would drop back to $1,180 than sustain these gains."

Spot gold rose further above the key level of $1,200 per ounce, gaining 0.3 percent to $1,211.89 an ounce by 0327 GMT. The metal had fallen to $1,183.46 earlier in the week - its lowest since June 2013.

Gold is well-bid as stocks fell after the International Monetary Fund cut its global economic growth forecasts for the third time this year on Tuesday, warning of weaker growth in core euro zone countries, Japan and big emerging markets like Brazil.

Equities were also hurt as German industrial output fell far more than expected in August, posting its biggest drop since the financial crisis in early 2009, the latest figures to raise question marks about Europe's largest economy.

"Despite a pause in the recent sell-off for gold and the possibility of a short covering rally, the bullish outlook on the dollar is likely to constrain any potential bullion rallies," HSBC analyst James Steel said.

The dollar has gained in recent weeks on speculation that the Federal Reserve would raise interest rates sooner and faster than expected.

Markets will be eyeing minutes of the Fed's last policy meeting due later on Wednesday for clues on when the U.S. central bank could raise rates. Higher rates would dent demand for gold, a non-interest-bearing asset.

For now, bullion investors were keenly watching the Shanghai Gold Exchange to gauge buying interest in China, the top buyer of the metal. Chinese markets had been closed for a week for the National Day holiday.

Premiums on the exchange - the platform for all physical trades in China - were about $5-$6 an ounce above global spot prices on Wednesday, compared with about $3 before Chinese markets closed for the holiday.

Sustained robust buying from China could support a rally in gold.