Gold bars. Picture: REUTERS
Gold bars. Picture: REUTERS

London — Gold clawed higher on Thursday, propelled by a weaker dollar, short-covering and physical buying in Asia.

The concern about new US trade tariffs on China, however, cast a cloud over the market.

"The precious metals are witnessing a relief bounce, which coupled with the strong oversold conditions is leading to some short covering," said Gianclaudio Torlizzi, partner at consultancy T-Commodity in Milan.

"The bottom is very close because I think the US dollar is close to reaching the top, together with the peak of the US economy."

Spot gold was up 0.6% at $1,203.35/oz at 10am GMT, after rising 0.5% in the previous session.

US gold futures added 0.6% at $1,209/oz.

Gold has tumbled more than 12% from a peak of $1,365.23 in April. Present levels have recently invoked a lot of physical buying in not just active gold buying countries like India and China, but in Southeast Asia for investment purposes too, traders and analysts said.

India’s gold imports more than doubled in August to hit their highest level in 15 months as lower prices prompted manufacturers to replenish inventory.

China’s yuan weakened against the dollar on Thursday as investors braced for more sweeping tariffs expected soon from Washington, making gold expensive for buyers in the world’s biggest consumer, traders said.

Gold has been under pressure for most of 2018 on rising interest rates, global trade tensions and an emerging-market currency crisis, with investors parking their money in the dollar, undermining the metal’s safe-haven status.

The dollar index against a basket of six major currencies fell 0.1% after shedding nearly 0.3% overnight.

Markets will be closely watching a US employment report due on Friday for clues about the pace of interest rate increases by the Federal Reserve.

"This week’s nonfarm payrolls data could strengthen the dollar further and push gold down. But it is likely to take support near $1,140," said Hareesh V, head of commodity research, Geojit Financial Services.

Among other precious metals, spot silver gained 0.8% to $14.27. The metal hit a more than two-and-a-half-year low at $13.97 early this week.

Platinum climbed 0.7% to $788.70, while palladium rose 0.7% to $979.50.