Gold edges higher amid warning of midyear slump
Gold edged higher on Thursday after hitting its lowest in nearly a week as the dollar pared gains, but analysts said bullion was vulnerable to more losses.
Spot gold was up 0.1% at $1,328.27/oz by 13.23pm GMT. Earlier in the session, it touched its lowest since January 12 at $1,323.70/oz.
US gold futures for February delivery slipped 0.8% p to $1,329/oz.
In the previous session, spot gold fell 0.8%, posting its worst one-day percentage decline since December 7 as the dollar bounced from three-year lows. "Gold continues to trade in lock-step with the US dollar," said Carsten Menke, analyst at Julius Baer in Zurich.
"We think the dollar has fallen too much. We see more upside for the dollar heading into the second quarter so that means that gold should move back below $1,300 and towards $1,250 by mid-year."
The dollar index gained as a rise in US Treasury yields prompted some investors to buy the greenback, but it drifted back from its highs.
The dollar got a boost after data showed on Wednesday that US industrial production increased more than expected in December. Spot gold is expected to fall to $1,311/oz, as it has broken a support at $1,329/oz, according to Reuters technical analyst Wang Tao.
Some analysts said a correction in digital currencies could support gold.
"Brokers in Europe report investors have increasingly been asking about switching from cryptocurrencies into gold," ANZ analysts said in a research note.
Bitcoin fell as much as 20% on Wednesday, dropping below $10,000 due to investor fears that regulators could clamp down.
In other precious metals, silver gained 0.2% to $17.05/oz and palladium shed 0.6% to $1,108.60/oz.
Platinum added 0.3% to $999.99/oz, after touching its highest since September 8 at $1,007.60/oz in the previous session. Over the past 15 years, platinum has largely moved higher in January and February due to seasonally weaker supply from top producer SA, Menke said.
"This seasonal rebound is playing out. And there is also some more room from short covering from the futures market."