LONDON: Gold rose for a third straight session on Thursday as tensions between Ukraine and Russia increased and equity markets fell, but the rebound could be short-lived due to strong U.S. data and prospects of a U.S. interest rate rise.
Gold rose as much as one percent and was up 0.7 percent at $1,291.70 an ounce by 1409 GMT, heading for its first weekly gain in three. It has traded in a narrow range in the past few weeks of just under $50 an ounce, the narrowest since August 2009.
U.S. gold futures rose $9.40 an ounce to $1,292.80.
"The market woke up on geopolitical headlines around Ukraine but we gave up some gains because of very strong U.S. economic data," VTB Capital analyst Andrey Kryuchenkov said.
The metal benefited from lower global equities and worsening international tensions after Ukraine accused Russia of bringing troops into the southeast of the country.
"Other than the push coming from some safe-haven demand, we don't seem to be able to convincingly exit this $1,270-$1,320 range," Societe Generale analyst Robin Bhar said.
"Looking ahead, we have quite a busy week of data, with non-farm payrolls next week on Friday and before that we have the ECB meeting."
The dollar reversed earlier losses and rose 0.1 percent against a basket of currencies after data showed the number of Americans filing new claims for unemployment benefits fell for a second straight week last week. Also, the U.S. economy rebounded more strongly than initially thought in the second quarter.
Positive data could increase already-high pressure within the Fed to more clearly acknowledge improvements in the U.S. economy as early as next month and lay the groundwork for the central bank's first interest rate hike in nearly a decade.
Higher interest rates would encourage investors to withdraw money from non-interest-bearing assets such as gold.
PHYSICAL BUYING
On the physical side, the recent fall in gold prices to a two-month low of $1,273.06 on Aug. 21 spurred some buying by the jewellery sector, but the quantity was small, dealers said.
Premiums for gold bars in Singapore remained steady at 80 cents to $1 an ounce to spot London prices.
Spot silver rose 1 percent to $19.60 an ounce, rebounding from a two-month low of $19.25 hit last week.
"Silver is outperforming on the basis that as gold doesn't manage to breach resistance, maybe a better way to position yourself would be in silver," SocGen's Bhar said.
Spot platinum rose 1 percent to $1,424.75 an ounce, while spot palladium was up 0.6 percent at $894.00 an ounce.
The world's second-biggest platinum producer Impala Platinum posted a 74 percent drop in full-year earnings on Thursday after most of its South African operations were hit by a five-month wage strike and said it was reviewing options to restore profits.
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