LONDON: Gold rose more than 1% on Thursday as the dollar retreated and Wall Street paused its recent rally as dismal US trade deficit data overshadowed slightly upbeat jobs numbers and optimism about an economic rebound.
Spot gold rose 0.5% to $1,706.05 per ounce at 10:56 a.m. ET, recovering from a slide to a near one-month low of $1,688.89 in the last session. US gold futures were up 0.4% at $1,710.90.
"Equity markets are still trading in the red and for gold market participants, that's interpreted as a bout of risk-off and is leading to an increase in investment demand," said Daniel Ghali, commodity strategist at TD Securities.
After a strong rally on Wednesday, US stocks opened lower despite US weekly jobless claims dipping below 2 million for the first time since mid-March.
Re-igniting worries about an economic slowdown, the US trade deficit surged in April as the COVID-19 pandemic upended the global flow of goods and services, pushing exports to a 10-year low.
The dollar also held near its lowest in about three months, making gold cheaper for holders of other currencies.
While gold has shown it can rally in a risk-on environment as well, "an equity market correction could also weigh on gold in the near term should liquidity needs materialise again," Standard Chartered analyst Suki Cooper said in a note, forecasting prices to average $1,700 in the third quarter. Earlier in the day, the European Central Bank beefed up its bond-buying programme to support the euro zone economy, briefly boosting equities.
"Long term picture for gold remains quite good," Commerzbank analyst Eugen Weinberg said, adding exchange-traded fund demand is "very strong."
Holdings in the SPDR Gold Trust ETF rose to 1,133.37 tonnes on Wednesday, the highest since April 2013. Elsewhere, palladium fell 2.6% to $1,899.33 after dipping to a near three-week low of $1,815.66 earlier, while platinum rose 0.4% to $829.48. Silver remained unchanged at $17.67.
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