SINGAPORE: Gold rose more than 1 percent on Monday and held near its highest in more than a week, as a rebound in prices from multi-year lows failed to damp investor appetite for the precious metal, causing a shortage in physical supply.
Recent bleak US growth data that raised hopes the Federal Reserve would keep its current pace of bond buying at $85 billion a month also supported gold, widely seen as a hedge against inflation.
US gold futures, which often provide trading cues to cash gold, hit a high of $1,472.20 an ounce. By 0553 GMT, prices stood at $1,468.90 an ounce, up $15.30. Spot gold rose $6.70 to $1,469.20 an ounce.
Both cash gold and futures sank to around $1,321 on April 16, their lowest in more than two years, after a drop below $1,500 sparked a sell-off that prompted investors to slash holdings of exchange-traded funds. They touched an 11-day peak above $1,484 on Friday.
"I don't think gold is out of the woods yet, but there's room for upward correction. One of the reasons why gold has dropped so much was the strong signs of US economic recovery. Now, we don't see much of it," said Joyce Liu, an investment analyst at Phillip Futures in Singapore.
"But investors are still roiled by the very recent tumble. The question is how sustainable is this physical buying, because at the same time, we are still seeing funds flowing out of gold. Retail investors won't be buying gold in hundreds of millions of dollars like the funds."
Premiums for gold bars have jumped to multi-year highs in Asia because of strong demand from the physical market, which has led to a shortage in gold bars, coins, nuggets and other products.
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