Gold gains as investors weigh US economy concerns

Gold gained in New York on Wednesday as investors weighed concern that the global recovery is stalling against slower physical demand. Palladium rose after the longest losing run in almost three years.

Global equities added 0.2% after dropping to the lowest in almost four months. The dollar fell versus a basket of 10 major currencies after an ADP Research Institute US jobs report released on Wednesday.

Gold slumped 28% last year as the Federal Reserve prepared to scale back stimulus. The US central bank said last week it will trim monthly bond buying by a further $10-billion. Markets in China, which probably overtook India as the largest gold consumer last year, are shut on Thursday for the Lunar New Year holiday.

"We expect gold to be underpinned as long as risk aversion prevails across the globe," Abhishek Chinchalkar, an analyst at Mumbai-based Anand Rathi Commodities, said in a report. "Gold continues to be very sensitive to US economic reports," while lower demand because of the holiday in China has limited rallies, he said.

Bullion for April delivery rose 1.3% to $1 267.10 an ounce by early morning on Wednesday on the Comex in New York. Futures trading volume was 15% below the average for the past 100 days for this time of day, data compiled by Bloomberg showed. Gold for immediate delivery increased 1% to $1 267.39.

Holdings in gold-backed exchange-traded products rose 0.9 metric tonne to 1 738.5 tonnes on Tuesday, data compiled by Bloomberg show. Assets slipped to 1 736 tonnes on January 28, the lowest level since October 2009.

Silver for delivery in March rose 1% to $19.625 an ounce. Palladium for the same month gained 1.5% to $710.45 an ounce. It reached $695.50 on Tuesday, the lowest since December 26, as it fell for a ninth straight session in the worst run since March 2011. Platinum for April delivery climbed 0.8%  to $1 384.70 an ounce. Prices fell to $1 361.40 on Tuesday, the lowest this year.

The world's biggest platinum producers resumed wage talks with a labour union representing workers in South Africa to try to end a two-week strike. The Association of Mineworkers and Construction Union, with more than 70 000 members in the platinum belt, is meeting with the industry on Wednesday. Police fired rubber bullets and water cannon to disperse a 3 000-strong crowd massed at an Anglo American Platinum mine on Tuesday.

"Prices could weaken further if the talks are believed to be making progress," James Steel, an analyst at HSBC Securities (USA), wrote in a report on Tuesday. "That said, we believe platinum and palladium prices are dropping below levels that are fundamentally justified, based on industrial and auto demand and sluggish mine production. This leads us to the view that regardless of the course of the strike, the platinum-group metals are likely to trend higher in the medium to longer term."– Bloomberg

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