Gold edges up on subdued physical demand, short-covering

The most active US gold futures for Feb delivery settled up $2.1, or 0.18%, at $1,140.90 per ounce

Gold prices edged higher on Wednesday as subdued cash demand and investor short-covering helped offset a stronger US dollar.

Spot gold > was up 0.27 per cent at $1,141.92 per ounce by 2:18 pm EST (1918 GMT), after hitting $1,148.98 on Tuesday, the strongest since Dec 14.

The most active US gold futures for February delivery settled up $2.1, or 0.18 per cent, at $1,140.90 per ounce.

Traders were covering short positions in options-related dealings and year-end demand from China and Russia buoyed prices, said George Gero, managing director at RBC Wealth Management.

"Gold is holding up despite lots of bears in the woods for lots of good reasons," he said.

 

Spot prices are poised to finish the year up about 8 per cent despite an 8 per cent drop in November, as US Treasury yields rose after Donald Trump's election led to speculation his commitment to infrastructure spending would spur growth.

Gold hit a 10-month low on Dec 15 as solid US economic data prompted the Federal Reserve to raise US interest rates for the first time in a year. The central bank signalled three more increases next year, up from the previous projection of two.

Recent upbeat US data has helped underscore expectations the Fed will raise interest rates more quickly next year, which would lower demand for non-yielding assets such as bullion, while boosting the dollar in which it is priced.

"In the short term, we are focussed towards support at $1,100 and a break of this will be very bearish for the metal. As for the upside, we really need to break the level of $1,170 and $1,200," said Naeem Aslam, chief market analyst at ThinkMarkets.

Reflecting bearish investor sentiment, assets in the SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, fell 0.14 per cent to 823.36 tonnes on Tuesday. Holdings are down about 13 per cent since the US presidential elections. 

The Shanghai Gold Exchange, the world's biggest physical bullion exchange, said on Wednesday it would curb the amount of gold investors can trade at one time, a move analysts said would limit institutional investors' influence on prices.

Spot silver > was up 0.31 per cent at $16 an ounce. The metal rose about 1.5 per cent on Tuesday.

Platinum > platinum was down 0.13 per cent at $899.30 per ounce and palladium > fell 0.48 per cent to $667.80, after rising over 2 per cent in the previous session.