Gold gained to track a firmer euro on Thursday and strong China economic growth underpinned
sentiment, while palladium paused for breather after rising to its highest in two years the previous day.
Subdued consumer inflation in means China may be not in a hurry to further tighten monetary policy, analysts said, raising the prospect of steady industrial metals demand.
China is the world's second-largest gold consumer.
Spot gold [XAU= 1153.45 -0.4501 (-0.04%) ] was at $1,156.85 an ounce, up $2.95 an ounce from New York's notional close on Wednesday. Gold rallied to $1,168.70 on Monday, its strongest since Dec. 4 but was struggling to revisit the level.
Bullion is about 6% below a record high above $1,226 struck in early December.
"I believe China is contemplating measures to tighten up the economy, whether in the form of revaluing the yuan or increasing interest rates. But the impact on commodities will be short-lived," said a dealer in Singapore. "Fundamental demand is there because the economy is booming. Investment demand for gold should be well supported."
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China's annual economic growth quickened in the first quarter to 11.9%, the fastest pace since 2007, benefiting from a low base of comparison last year and the momentum imparted by a massive bank-financed stimulus. Consumer prices rose 2.4% in the year to March, less than expected.
The euro edged up to $1.3660 against the dollar, while commodity currencies like the Australian dollar held gains on a pick up in risk appetite and growing confidence that China may soon move to revalue its currency.
Any move by China to revalue its currency is seen to be positive for Asian currencies and could weigh on the U.S. dollar in the short term. In theory, a weak dollar makes dollar-priced gold cheaper for holders of other currencies.
Investors looking to preserve wealth from a global economic crisis last year bought more gold than jewellery consumers for the first time since gold was rallying back in 1980, metals
consultancy GFMS said.
COMEX June fell $1.2 an ounce to $1,158.4 an ounce. "I think sentiment for gold is a bit mixed right now. It needs to consolidate around these levels," said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.
"I think some investors are tightening their gold holdings and may be buying stocks," said Leung, adding that platinum group metals also saw profit taking from recent highs.
Palladium [XPD= Unavailable () ]fell $1.25 to $544.75 an ounce, having risen as high as $548.50 an ounce on Wednesday on growing demand by exchange traded funds and hopes of improving demand from makers of autocatalysts.
Japan's Nikkei average rose 0.7% on Thursday on stronger-than-expected results from companies such as JPMorgan Chase & Co boosted Wall Street.
The world's largest gold-backed exchange-traded fund, SPDR Gold Trust [GLD 113.03 0.34 (+0.3%) ], said its holdings stood at a record of 1,141.041 tons as of April 14, unchanged from the previous business day.
