Gold firmed on Tuesday as a retreat in the dollar index helped the metal snap a four-day losing streak, but remained close to 2-1/2 week lows as uncertainty over a looming US interest rate hike persisted. Spot gold was up 0.2 percent at $1,121.08 an ounce at 1417 GMT, while US gold futures for December delivery were down 80 cents an ounce at $1,120.60.
Spot prices hit their lowest since mid-August on Friday, at $1,116.20 an ounce, as hotly anticipated US payrolls data failed to provide clarity on the timing of the Federal Reserve's first interest rate rise in nearly a decade. Expectations for rising rates, which would lift the opportunity cost of holding non-yielding bullion while boosting the dollar, have pushed the metal 5 percent lower this year and remain gold's biggest driver, analysts said.
Trade is expected to be range-bound ahead of the Fed's next policy meeting on September 16 and 17. "Last week everyone was waiting for the non-farm payrolls data, and this week everyone's waiting for the FOMC (meeting) on the 17th," said MKS' head of trading Afshin Nabavi. "We're stuck in this range of $1,125-1,127 on the upside and $1,115-1,118 on the downside." "Investors need some kind of assurance on direction before getting into the market," he added.
Shares rose in the United States and Europe while the dollar lost ground against a currency basket after trade data from China and Germany highlighted the divergent outlooks of the two heavyweight economies. Gold has failed to attract strong investor interest as a safe haven despite the recent weakness in stocks due to worries over the Chinese economy, showing that the metal is struggling to find direction outside US monetary policy.
Silver was up 0.6 percent at $14.64 an ounce, while platinum was up 1.6 percent at $999.49 an ounce and palladium was up 2.7 percent at $589.50 an ounce. The platinum market deficit shrank in the second quarter, data from the World Platinum Investment Council showed on Tuesday, as rising mine supply and autocatalyst and jewellery recycling outstripped a much smaller increase in demand.
"Whilst the estimate for the deficit for full-year 2015 was increased, we note that the price of the metal remains weak, and the weakening (South African rand) is providing producers with relief," Investec said in a note. "We do not see a material recovery in the metal until the industry is able to fundamentally restructure."
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