LONDON: Gold rose 1 percent on Wednesday as stock markets fell for a second day, with a cut in the International Monetary Fund's global growth forecasts fuelling concerns over the world economy.
European stocks hit 1-1/2-month lows, and world share indexes pushed back towards their lowest in six months, while German bond yields slipped towards record lows as concerns over global growth spurred demand for safe-haven debt.
Spot gold was up 0.9 percent at $1,219.30 an ounce at 0923 GMT, having earlier touched a high of $1,220.40. US gold futures for December delivery were up $7.50 an ounce at $1,219.90. The metal earlier this week had plunged to its lowest since mid-2013 at $1,183.46 after upbeat US jobs data boosted the dollar and stocks and buoyed expectations that the Federal Reserve will keep scaling back its ultra-loose monetary policy.
It has since rebounded as stock markets have lost traction and the dollar has retreated from highs. As Chinese markets returned from a one-week holiday on Wednesday, traders said the metal could benefit from fresh physical demand.
"Precious metals are finding support from several corners today. Stock markets are once again showing signs of weakness, while US bond yields are moving lower once again," Saxo Bank's head of commodity research Ole Hansen said.
"Adding to this is a sense that the dollar now may need a bigger correction before buying resumes, while the return of China to these lower levels have raised expectations about demand," he added. "At the moment volumes are not really picking up in order to attract a major round of short-covering we need to see the price above $1,224."
Markets will be eyeing minutes of the Fed's last policy meeting due later on Wednesday for clues on when the US central bank could raise rates. Higher rates would dent demand for gold, a non-interest-bearing asset.
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