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Gold bounces back as dollar slips, economic risks grow

·2-min read
FILE PHOTO: Newly casted ingots of 99.99% pure gold are stored after weighing at the Krastsvetmet non-ferrous metals plant in the Siberian city of Krasnoyarsk

By Arundhati Sarkar

(Reuters) - Gold bounced off a one-year low on Thursday after gaining more than 1% as the dollar eased and persistent economic concerns boosted bullion's safe-haven appeal.

Spot gold was up 1% at $1,712.61 per ounce by 1636 GMT, after hitting its lowest since March 2021 at $1,680.25.

U.S. gold futures rose 0.6% to $1,711.00.

Helping gold's uptick, the euro jumped against the dollar before paring gains. The European Central Bank raised interest rates by more than expected as inflation concerns trumped growth considerations, even as the euro zone economy reels from the Ukraine crisis.

The geopolitical risks over Ukraine, higher energy prices and massive amounts of debt are all driving buying interest in gold though, said Daniel Pavilonis, senior market strategist, RJO Futures.

The dollar retreated, making gold more attractive for overseas buyers. [USD/]

But overall, gold has declined more than $380 since early March as the dollar's recent rally added to headwinds from aggressive rate hikes, which decrease the opportunity cost of holding the non-yielding asset and dim its safe-haven lure.

"Gold remains caught between elevated inflation, growing concerns over a recession and a flight to quality on the one hand, but sharp rate hikes, a strong USD and seasonally weak demand on the other," said Standard Chartered analyst Suki Cooper.

The U.S. Federal Reserve is expected to raise rates by 75 basis points next week.

"The current rally would be short-lived as the Fed is expected to be pretty aggressive and the dollar might hold its strength," said Chris Gaffney, president of world markets at TIAA Bank.

If the Fed signals they're done with the real aggressive moves, we could see "an opportunistic rally in gold" but it will be pressured until then, Gaffney added.

Silver rose 0.7% to $18.78 per ounce, platinum gained 2% to $874.98, while palladium was up 1% at $1,880.48.

(Reporting by Arundhati Sarkar, Arpan Varghese and Ashitha Shivaprasad in Bengaluru; Editing by Krishna Chandra Eluri and Devika Syamnath)