Gold prices held near $1,720 an ounce on Thursday as stock markets climbed, indicating better appetite for assets seen as higher risk, while investors focused on US employment data due on Friday for clues on monetary policy.
US stocks rose at the open, while European shares were bolstered by a well received earnings report from Royal Dutch Shell. The dollar also surrendered gains against a currency basket after jobless claims data beat expectations.
Spot gold was at $1,719.19 at 16:47 SA time, little changed from the previous session, while US gold futures for December were up 90 cents at $1,720.
Gold prices rallied to nearly $1,800 an ounce in early October after the Federal Reserve announced new monetary stimulus measures, which tend to help gold by fuelling fears of inflation and maintaining pressure on interest rates.
It has also benefited from fears that the United States could be facing a 'fiscal cliff' if lawmakers fail to avert looming tax hikes and cuts to public spending, which are due to kick in at the start of next year.
“Before the elections on Tuesday, the non-farm payrolls will be quite a big deal,” Natixis analyst Bernard Dahdah said. “(Further out), we have the fiscal cliff in the next two months. If you have more issues with that, that will definitely send the price of gold higher.”
With the extent of the Fed's latest stimulus measures largely dependent on the health of the US labour market, Friday's non-farm payrolls data will be closely watched.
Analysts in a Reuters poll expected the economy to have added 125,000 jobs last month, with the unemployment rate seen at 7.9 percent, against 7.8 percent the previous month.
Among other commodities, prices of industrial metals such as copper benefited from a report from China's National Bureau of Statistics showing its October Purchasing Managers' Index had risen to 50.2 from 49.8 in September.
It marked the first reading above 50, the level that divides a pickup in activity from a slowdown, since July and backed the view that growth could be picking up in the world's second-largest economy.
“Chinese PMI came out on a promising level today and shows signs of industrial growth for the first time in three months,” Heraeus trader Alexander Zumpfe said.
“We consider this as positive for overall commodity demand in mid-term,” though its immediate impact was limited, he said.
Gold is often traded in a basket of commodities, so can benefit from strength in the wider complex.
GOLD MAY REBOUND
Technical analysis suggested that spot gold may rebound marginally to $1,736 an ounce, as indicated by a falling channel and a Fibonacci retracement analysis, according to Reuters market analyst Wang Tao.
ScotiaMocatta said in a note that the precious metal was challenging resistance at $1,721. “Support is at $1,693, the 38.2 percent retracement of the May-to-October uptrend, followed by $1,661, the 50 percent retracement level,” it added.
On the physical markets, traders in India took to the sidelines, waiting for a further price correction to buy. Those betting on higher prices are expecting Indian demand to rise this month as festival season peaks during Diwali.
“Gold prices ... may be helped by a pickup in Indian festive buying ahead of Diwali and the Indian wedding season,” HSBC said in a note.
Russian gold companies increased gold production by 3.1 percent in the first nine months of 2012 compared with the same period of last year, an industry lobby said.
Among other precious metals, spot platinum was up 0.7 percent at $1,572.75 an ounce, and palladium was up 2.1 percent at $612.97 an ounce. Silver was up 0.5 percent at $32.36 an ounce.
Anglo American Platinum said it did not have sufficient staff at its strike-hit mines in South Africa to operate as workers had not yet accepted a company offer to reinstate sacked miners and return to work.
The world's top platinum producer said it was losing an average of 3,694 ounces of platinum per day due to the strike, which is now in its seventh week. To date, 141,640 ounces of platinum have been lost, it said. - Reuters