LONDON — Gold rose in Europe on Thursday as the U.S. dollar weakened, but remained rangebound, with analysts expecting the metal to consolidate after recent sharp gains.
Investor interest in the precious metal remains robust, with bullion holdings of the world's largest exchange-traded fund, the SPDR Gold Trust, rising to a record level.
Spot gold was quoted at $876.60/878.60 (U.S.) an ounce at 0953 GMT, up from $866.90 late in New York on Wednesday, when prices rose to a two-month peak of $881.20.
Prices have risen more than $130 an ounce month-on-month as the dollar weakened against the euro.
“For the rest of the year, I think we will basically see some consolidation of the gains we have seen in the last few weeks,” said BNP Paribas analyst Michael Widmer. “A gold price movement of the size of yesterday would be surprising.”
The precious metal was taking support from some fresh dollar weakness, as the U.S. currency slipped to fresh 2-1/2 month lows against the euro.
The euro briefly trimmed gains after a weak reading of the German business climate by the IFO research institute, but remains firmer.
The U.S. dollar has been suffering since the Federal Reserve slashed interest rates to between zero and 0.25 per cent on Tuesday. A weaker U.S. currency supports gold, which is often bought as an alternative investment to the dollar.
The other main external driver of gold, oil prices, were little changed around $40 a barrel as the market digested an output cut from OPEC on Wednesday.
Investor demand for exposure to bullion prices through exchange-traded funds, which issue securities backed by physical gold, remained firm.
The world's largest gold-backed ETF, the SPDR Gold Trust, said its bullion holdings rose 6.1 tonnes or almost 1 per cent on Dec 17 to a new record high.
The trust, which issues securities backed by physical stocks of gold, now holds 775.33 tonnes of bullion. Its holdings are up 17.5 tonnes or 2.3 per cent week-on-week.
However, demand for small investment products such as coins and bars has dipped in Europe from recent highs, traders say.
The market is looking ahead to economic data due out later in the session for clues as to the next direction for gold.
“Watch out for the U.S. Philadelphia Fed Business outlook and leading indicator indices later today – negative statistics are expected for both,” said Standard Bank analyst Manqoba Madinane.
“Worse-than-expected data should keep the greenback on the back foot, which should also benefit precious metals.”
Among other precious metals, platinum and palladium inched up, tracking gains in gold, despite more bad news from the car industry, the main consumer of both metals.
U.S. carmaker Chrysler said it will halt its factory operations for at least a month, putting new pressure on the government to help automakers.
Goldman Sachs cut its global automotive production and sales forecasts, citing a sharp decline in the operating environment.
Meanwhile industry association ACEA said European new commercial vehicle sales dropped a record 30.8 per cent year-on-year in November.
Spot platinum climbed to $875/880 an ounce from $863.50, while palladium was at $178.50/183.50 from $175.50. Silver was at $11.40/11.48 an ounce from $11.37.
