Gold Hits 5-Day High As Dollar Weakens

Gold rose for the second consecutive session early Tuesday, boosted by growing speculation about stronger demand in China and a weaker dollar.

The rebound in bullion markets is still evident today, as traders snapped last week’s selloff and took back losses triggered by Friday’s better-than-expected US employment. However, gold is set for the first annual drop in 13 years as market participant continue to believe the US Federal Reserve will soon begin tapering its $85 billion of monthly bond purchases amid fresh signs of improvement in US growth.

Spot Gold rose 0.49% to $1,246.48 an ounce as of 02:03 a.m. EST, easing slightly after price hit the highest in five days at $1,247.06 earlier today, compared with Monday`s close at $1,240.35.

Data from Hong Kong customs on Monday showed that October was China`s second highest month for gold imports. The world`s largest gold producer imported 148 tons in OCtober, the highest since since March, when the country imported 224 tons.

Gold Junkies turn their attention to the Fed`s Dec 16-17 policy meeting that could offer clues on the outlook for the bank`s stimulus, which has supported gold prices as it boosts the metal`s inflation-hedge appeal.

Weakness in the dollar also helped ease the pressure on gold prices, with the Dollar Index (USDIX) falling for the second session hitting an intraday low of 80.00.

St. Louis Fed President James Bullard on Monday supported market consensus of the bank’s tapering as early as December, where he said the Fed could slightly reduce its quantitative easing program this month in response to signs of an improved labor market.

Gold fell on Friday after the Department of Labor said the US economy added 203 thousand jobs in November, beating expectations for a 180 thousand increase and up from a downwardly revised 200 thousand rise in the previous month.

Meanwhile, the intraday bias remains sideways while gold pushes towards $1,250 key resistance level, which should limit the upside move and force the price back lower within downtrend.

A break above that strong resistance would signal further correctional recovery with the context of the bear channel.