Gold price rebounds on softer USD

The yellow metal has been encouraged by a weaker greenback after disappointing US data.

Spot gold edged up 0.7 per cent at $US1,352.50 a troy ounce in midmorning London trade. Picture: Akos Stiller/Bloomberg.

Gold prices rebounded on Wednesday, encouraged by a weaker dollar after disappointing US productivity data.

Spot gold edged up 0.7 per cent at $US1,352.50 a troy ounce in midmorning London trade.

Data released Tuesday showed US non-farm productivity — the goods and services produced each hour by American workers — contracted 0.5 per cent in the second quarter.

The data damped positive economic sentiment that had followed strong US jobs data at the close of last week and weakened the dollar, boosting gold.

“Finding support from a weaker US dollar, falling bond yields and somewhat lower rate hike expectations in the US — and despite firm stock markets — gold has climbed back up,” analysts at Commerzbank AG said in a note to clients.

The Wall Street Journal’s Dollar Index was recently down 0.4 per cent at 86.20. As gold is dollar-denominated, it becomes cheaper to buy for holders of other currencies when the greenback falls.

Future movement in gold prices will likely be determined by more US data this week, with the US Commerce Department’s July retail sales report due Friday.

Norbert Ruecker, head of commodities research at Julius Baer, said though US productivity data was disappointing, it is “more a bit of near-term noise.”

“For us the big picture remains basically unchanged for gold. Sentiment seems to be very bullish, if you look at the futures positioning and record inflows into gold products,” he said.

Mr Ruecker added a recent bounce in other precious metals prices, specifically palladium, may have caused sentiment to spill over.

On Wednesday, silver was up 1.9 per cent at $US20.31 a troy ounce, platinum rose 2.4 per cent to $US1,184.50 and palladium was up 6.04 per cent at $US736.95 a troy ounce.

— Dow Jones newswires