New York/London: Gold rose to a three-month high above $1,300 an ounce on Friday, gaining 1 per cent and notching its biggest weekly gain in six months, as weak US manufacturing output pressured the dollar and lifted bullion’s currency-hedge appeal.
A technical break-out above tough resistance at its 200-day moving average, and signs of recovering investment demand in gold exchange-traded funds, also triggered gold buying, traders said.
Bullion reversed its recent strong inverse link with equities, which had been pressured by economic uncertainties and emerging-market jitters.
On Friday, US equities, measured by the S&P 500 index, rose 0.5 per cent as investors were willing to add riskier investments by overlooking some soft economic data stemming from bad weather.
“Risk-on is typically deemed bad for precious metals prices, but the downdraft for the dollar and the steady-as-she-goes Fed policy threatening slow retreat from an ultra-easy stance, is boosting demand for gold,” said Andrew Wilkinson, chief market analyst at Interactive Brokers LLC.
Spot gold was up 1.2 per cent at $1,317.90 an ounce by 2.06pm EST (1906 GMT), after rising to its highest since November 7 at $1,320.90. It was up around 4 per cent for the week, the largest such gain since mid-August.
US gold futures for April delivery settled up $18.50 at $1,318.60 an ounce, up for an eighth straight session in the longest winning streak since July 2011.
Trading volume was about 10 per cent below its 30-day moving average, preliminary Reuters data showed.
The technical picture has improved over the past few sessions and a move above its 200-day moving average, last seen in August 2012, analysts said.
Cautious
However, some traders noted that the 14-day relative strength index (RSI) for spot gold jumped to about 74. A reading above 70 is considered to be in overbought territory.
Gold has gained nearly 9 per cent since the beginning of the year, after a 28 per cent drop in 2013, on doubts over the US economic recovery and as emerging-market turmoil weighed on some equity markets.
Analysts remain cautious over the medium-term outlook for gold, however. Many expect the US economy to recover and the dollar to rally, making the investment case for gold, usually seen as a safe haven in times of trouble, still unattractive.
Investor sentiment seems to have improved, with SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, posting its biggest inflow since late December, up 7.5 tonnes to 806.35 tonnes on Thursday.
Silver climbed to its highest since November at $21.42 an ounce earlier and posted its second straight weekly gain. It was up 4.3 per cent for the day at $21.32.
Platinum gained 0.8 per cent to $1,423.50 an ounce, while palladium climbed 0.6 per cent to $733.25 an ounce.
