NEW YORK (Reuters) - Gold prices rose on Thursday for a seventh consecutive session as a weaker dollar and surging grain prices lifted the metal’s investment appeal.
Technical support also helped gold futures after a recent price rally triggered the first buy signal in four months.
The usual inverse relationship between gold and the dollar loosened earlier this year as extreme risk aversion benefited both assets, but it has since shown signs of a resurgence.
“The weakening of the dollar helped. The inverse relationship between gold and the dollar is beginning to work in the favor of gold recently,” said James Steel, chief commodity analyst at HSBC.
Rising wheat prices after Russia said it would temporarily halt grain exports due to the country’s worst drought on record also sparked some inflation worries, Steel said.
“Concern over the suspension of grain export from Russia and escalating grain prices are triggering some concerns, which are feeding into gold,” he said.
Spot gold was at $1,195.65 an ounce at 3:02 p.m. EDT against $1,194.60 late in New York on Wednesday. U.S. COMEX December futures settled up $3.40 at $1,199.30 an ounce.
Gold benefited in earlier trade from gains in the euro against the dollar after European Central Bank President Jean-Claude Trichet said incoming third-quarter economic data showed stronger-than-expected euro zone growth.
“Gold has been trading like a currency, with the dollar,” he said. “That might be reversing if there is some sort of clarity within the market. If we can avoid panic, I think things will start going back to normal in that relationship,” said Jeff Pritchard, an analyst at Altavest Worldwide Trading.
A moving average convergence/divergence (MACD) analysis, which focuses on exponential moving averages and closing prices, revealed a buy signal earlier this week when the MACD moved above the signal line on price graphs.
“This is actually a real buy signal, the first time it’s had from under the zero line for a long time,” said Rick Bensignor, chief market strategist at investment banking group Execution Noble LLC.
Trading volume was light ahead of key U.S. nonfarm payrolls data due on Friday.
Economists polled by Reuters estimated that U.S. nonfarm payrolls shed 65,000 jobs in July.
“We’ve said for months that $1,250 might be the top. We haven’t really seen anything to make us depart from that in the last month or so,” said Citi analyst David Thurtell of gold prices.
“We can get back up there if, say, worries emerge about the U.S. fiscal situation.”
There has been intense speculation in the fixed income markets that the Federal Reserve will embark on a fresh bond-buying program to ensure interest rates remain at their current low levels for some time, an environment that would be beneficial to gold which offers zero yield.
Holdings of the world’s largest gold exchange-traded fund, the SPDR Gold Trust, fell to 1,281.8 tonnes, its seventh straight decline in less than four weeks. Holdings hit a record 1,320.436 tonnes on June 29. <GOL/SPDR>
Silver was up about 0.4 percent to $18.32 against $18.25 in New York on Wednesday..
Platinum was at $1,570 an ounce versus $1,577, while palladium was at $496 versus $494.10.
Additional reporting by Amanda Cooper and Jan Harvey in London, and Lewa Pardomuan in Singapore; editing by Jim Marshall