Gold rose 0.5 percent to a three-month high on Thursday, targeting a break above $1,300 after disappointing U.S. retail sales data weighed on the dollar and increased bullion’s appeal as a currency hedge.
The dollar index tumbled 0.4 percent after U.S. retail sales fell unexpectedly in January and the number of Americans filing new claims for unemployment benefits rose last week, in the latest signs of slowing economic growth. The yellow metal came within less than $1 of breaking above the $1,300 an ounce mark, a level last seen in early November.
Turnover, however, was light. Bullion has been boosted by a combination of better investment demand in gold exchange-traded funds and safe-haven demand because of recent pullback in equities and tumbling assets in emerging markets. “In the near-term, a convincing close above the psychological $1,300 an ounce level may lend additional support for bullion, while a failure to break this threshold may be seen as inviting for investor profit-taking,” said James Steel, chief precious metals analyst at HSBC.
Earlier in the session, spot gold rose to $1,299.50 an ounce, its highest since Nov. 8 earlier. It was last up 0.5 percent at $1,296.69 an ounce by 11:25 a.m. EST (1625 GMT). U.S. COMEX gold futures for February delivery climbed $2.30 to $1,297.20 an ounce. Trading volume was on track to finish below its 30-day average, preliminary Reuters data showed.
On technical charts, gold could face strong resistance at the $1,300 level and at the 200-day moving average of $1,304, traders said. Quantitative Commodity Research owner Peter Fertig said the $1,300 psychological barrier could be breached as long as some uncertainty remains in the equity markets and the dollar remains under pressure. Recent U.S. data, including two straight months of weak jobs growth, have raised questions over whether the world’s biggest economy can sustain growth and made some investors hope the Fed would take a slower approach to tapering its bond purchases.
Investors have been cautiously moving back into the precious metal as seen in flows into SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund. Holdings in the ETF rose 1.80 tonnes to 798.85 tonnes on Tuesday. The fund, which lost around 500 tonnes in 2013, has not recorded any outflows in three weeks.