Gold nudged three-week highs on Wednesday, supported by an increased focus on inflation after China's second interest rate hike in six weeks and residual interest in the metal as a haven. Spot gold was bid at $1,363.20 an ounce at 1612 GMT, against $1,363.59 late in New York on Tuesday. US gold futures for April delivery rose 0.1 percent to $1,365.50.
-- Platinum, palladium rally to multi-year highs
A change in previously lacklustre sentiment towards the precious metal on Tuesday as it held its ground after China's rate hike prompted a scramble among speculative investors to cover short positions, lifting prices more than 1 percent. A run of well-received economic data in January had taken the wind out of gold's sails and increased speculation a correction was due, pushing prices back towards $1,300 an ounce.
"A lot of speculative (investors) that had gone in at the end of last year clearly saw growth being reignited and they got scared," said London & Capital portfolio manager Pau Morilla Giner. "They thought that gold would lose its appeal." Holdings of the world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, dipped to 1,228.56 tonnes on Tuesday from 1,228.864 tonnes the previous day, although the hefty outflows seen in January have apparently been staunched.
The SPDR fund saw its second-biggest monthly outflow and the main silver ETF, the iShares Silver Trust, its biggest ever outflow last month, adding downward momentum to precious metal prices. Silver was bid at $30.34 an ounce against $30.31, after reaching its highest price since January 4 on Tuesday at $30.84 an ounce.
The gold: silver ratio - the number of silver ounces needed to buy an ounce of gold - recovered from the near five-year low below 45 it reached on Tuesday to just above that level. Platinum and palladium rose back to multi-year highs on Wednesday at $1,865 and $836.75 an ounce respectively, boosted by firmer gold prices, a softer dollar, and expectations that demand from carmakers for the autocatalyst metals will improve.
Analysts also suspect platinum output from South Africa, which produces four-fifths of world supply of the metal, and palladium exports from Russia could be constrained this year. "Supply side fundamentals and the economic recovery support a slightly brighter future outlook," said VTB Capital in a note. Platinum was later at $1,850.30 an ounce against $1,855.24, while palladium was at $828.35 versus $835.72.
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