SINGAPORE, (Reuters) – Gold rose for a second day on Thursday as the U.S. dollar fell to a 16-month low against a basket of currencies on expectations the Federal Reserve will lag global central banks in raising interest rates.
Bullion held within $20 of the record high of $1,476.21 an ounce struck at the start of the week, with declines in exchange traded fund holdings suggesting investors are keen to book profits.
A dip from all-time highs would spur physical purchases from jewellers in Asia. Worries about inflation have also ensured steady demand from China, which will release consumer prices and other key data such as GDP on Friday that will offer clues on Beijing’s next monetary policy move.
Hong Kong’s Phoenix TV on Thursday said annual inflation accelerated to between 5.3 and 5.4 percent in March, without citing a source for the information.
Spot gold rose $8.69 to $1,463.30 an ounce by 7:32 a.m. British time as technical buying accelerated after prices breached Wednesday’s intraday high.
“Gold could be supported by the weak dollar and the loose monetary policy from the Federal Reserve,” said Ong Yi Ling, investment analyst at Phillip Futures in Singapore. “Asian buying may resurface upon dips in prices. Chinese demand for gold is expected to remain strong. Amidst rising inflation and a lack of investment alternatives, gold is sought as a store of value.”
Economists polled by Reuters had expected annual inflation in March to run at 32-month high of 5.2 percent, up from February’s 4.9 percent.
Gold’s decade-long price rally could take the metal above $1,600 an ounce by year-end, metals consultancy GFMS said in a widely anticipated industry report on Wednesday, as investor appetite for gold sharpens further.
The dollar index .DXY, which measures its strength against major currencies, fell to 74.676, bringing its losses this year to around 5 percent.
“There’s steady buying from China. They don’t seem to be affected by the price movements. I think the government still encourages people to buy gold instead of property,” said a dealer in Hong Kong, referring to Beijing’s move to rein in the red-hot property sector.
“Silver is in good demand from India. Maybe because the price of gold is too high, and they turn to silver. Demand started to appear two weeks ago.”
India has shown steady interest in silver since early this year, although it was not clear whether the metal was now used a substitute for gold. India is in the midst of the wedding season, with gold jewellery a common gift.
Spot silver rose 71 cents to $41.33 an ounce, not far from a 31-year high at $41.93 struck on Monday.
“Prices are extremely high, currently, so perhaps it could take a breather,” said a dealer in Singapore. “But if gold goes up, silver is likely rise as well. I continue to look for silver taking its cue from gold.”
IShares Silver Trust said its holdings slipped to 10,969.71 tonnes by April 13 from 11,212.53 tonnes on April 12, and a record of 11,242.89 tonnes hit on April 8.
The world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings extended losses and fell to 1,212.964 tonnes by April 13, their lowest in a week, from 1,216.299 tonnes on April 12.
U.S. gold futures for June rose $8.8 an ounce to $1,464.4 an ounce.
The Singapore Mercantile Exchange will launch cash-settled gold, silver and copper futures contracts on April 15, the exchange said in a press release, which may carve out a new market for speculators seeking arbitrage opportunities.
In other markets, Japan’s Nikkei average inched up, while Brent crude fell to trade below $123 a barrel on concern about the impact of high prices on demand.