Gold climbed above $1,650 an ounce in Europe on Thursday as the euro rose against the dollar after a well-received auction of Spanish bonds, but its gains were curbed by uncertainty ahead of a European Central Bank interest rate decision later in the day.
Firm demand for the precious metal from leading consumers China and India and a recovery in prices to above a key technical level are reassuring investors that the metal can keep rising after prices fell 10 percent in December, analysts said.
Spot gold was up 0.6 percent at $1,650.34 an ounce at 12:09 SA time, having earlier touched a one-month high at $1,652.30. US gold futures for February delivery were up $12.60 an ounce at $1,652.20.
The euro climbed to session highs against the dollar after an encouraging Spanish bond auction, which saw nearly 10 billion euros' worth of bonds sold against a target of 4-5 billion. Traders are awaiting the ECB rates decision at 14:45 SA time.
Economists polled by Reuters say the ECB will take a breather this month after unleashing back-to-back interest rate cuts, pausing to assess the impact of the crisis-fighting steps it took in the final two months of 2011.
The wording of the post-announcement press conference will be closely watched for any suggestion of further monetary easing, however.
“The Bank of England and European Central Bank decisions will likely benefit gold prices,” said LGT Capital Management analyst Bayram Dincer.
“I don't expect a (rate) cut, and we may see a slightly more dovish statement regarding long-term operation rates and bond buying, new liquidity measures.”
Concerns that the euro zone economy remains mired in its debt crisis at a time when the US economy is improving has pressured the euro and consequently lifted euro-priced gold. Gold in euro terms has outperformed the spot metal this year, rising 7.4 percent against dollar gold's 5.6 percent.
INDIA GEARS UP FOR WEDDING SEASON
Demand for physical metal in number one gold consumer India rose ahead of its wedding season as the rupee strengthened, dealers in Mumbai said.
“Demand has been good since last week, as prices are down due to a stronger rupee,” said Harshad Ajmera, proprietor of JJ Gold House in Kolkata. “Jewellers are comfortable at this rate.”
Chinese demand ahead of the Lunar New Year there this month has largely run its course, dealers said. Meanwhile, Chinese supply rose 2.7 percent in November to 32.6 tonnes, the Ministry of Industry and Information Technology said on Thursday.
China is the world's biggest producer of mined gold.
Among other precious metals, silver was up 1.3 percent at $30.32 an ounce.
Demand for silver coins has been strong at the start of the year, with the US Mint reporting American Eagle silver coin sales of 4.257 million ounces in January so far, already a higher volume than recorded in any of the previous three months.
US Mint gold coin sales have also been healthy at 82,500 ounces so far this month, already 26 percent higher than in the entire month of December.
Spot platinum was up 0.6 percent at $1,498.24 an ounce, while spot palladium was up 0.2 percent at $641.50 an ounce.
Platinum climbed for a fourth day on Thursday, on track for its largest weekly gain since October with a rise of 7 percent. Platinum's outperformance of gold pulled the gold/platinum ratio - the number of platinum ounces needed to buy and ounce of gold - down to 1.10 from a high of 1.15 earlier this week.
“Platinum group metal prices, of platinum in particular, are still benefiting from the South African state utility Eskom's warning earlier this week of 'extremely tight' electricity supply this month,” HSBC said in a note.
“Though there are no planned blackouts now, Eskom requested that consumers, especially energy-intensive industrial users such as mines, reduce demand to ease strain on the power grid.”
“Even without any power-related interruption in mine output, we believe that the prospect of a short-term disruption in output underlines tight supply/demand fundamentals in the platinum and palladium markets,” it said. - Reuters