"Continued unpredictability of the Trump administration, North Korea flexing its muscles again and weaker data coming from the US has helped bring back some interest," said Ole Hansen, head of commodities strategy at Saxo Bank. Worse than expected US data has reduced expectations of aggressive interest rate increases by the US Federal Reserve this year, though traders still expect a rise in June.
Higher interest rates tend to boost the dollar and push bond yields up, putting pressure on gold prices by increasing the opportunity cost of holding non-yielding bullion. "Unless there is more stronger data, more than two rate hikes are not very likely (this year)," said Argonaut Securities analyst Helen Lau. Money managers' net longs in COMEX gold fell to the lowest in six-weeks in the week ending May 9.
Gold demand, meanwhile, has strengthened in China and India, supporting prices. In other precious metals, silver was up 1.1 percent at $16.63 an ounce, after money managers cut their net long stance in silver to the smallest since February 2016 from a record high last month. Platinum was up 1.1 percent at $927.48, as producers, fabricators and traders gathered for Platinum Week in London. The metal used for jewellery and emission-controlling catalytic converters in diesel vehicles has gained more than 5 percent from a 4-1/2-month low of $889.10 on May 4.
The World Platinum Investment Council said on Monday that a market deficit would shrink this year as demand falls and low prices discourage investment, while autocatalyst maker Johnson Matthey said that 2017 would bring the first surplus in six years. Palladium turned down 1.1 percent to $797.40 an ounce.
Copyright Reuters, 2017