Gold price gains after US data supports Fed stimulus caution
London: Gold extended earlier gains on Wednesday after weak U.S. jobs data supported the view that the Federal Reserve would signal plans later in the day to keep its stimulus intact for months.
The ADP National Employment Report showed U.S. companies hired 130,000 workers in October, fewer than the 150,000 forecast by economists polled by Reuters.
The Federal Open Market Committee (FOMC) will deliver a statement after it announces its rate decision at 1800 GMT, where it is widely expected to keep its massive bond-buying programme unchanged and to signal it won't scaling back stimulus until 2014.
"My feeling is that the overall tone (of the Fed statement) will be somewhat dovish, it will acknowledge the uncertainty generated by the government shutdown and weak data and will emphasise a cautious response going forward," Mitsubishi analyst Jonathan Butler said.
"All those things should be supportive of gold but I think they could be by then priced in and we may see some choppy trading around the time of the announcement."
Spot gold rose as much as 1.1 percent to a session high of USD 1,358.06 an ounce after the U.S. data release and was up 0.8 percent at USD 1,354.66 by 1314 GMT.
The metal hit a five-week high of USD 1,361.60 on Monday, before retreating. A break above the 2013 resistance line of USD 1,359.52 will confirm that another leg upward is being made, Commerzbank technical analysts said.
U.S. gold futures for December delivery rose by USD 11.00 an ounce to USD 1,356.60.
The dollar was little changed against a basket of currencies, while U.S. Treasury yields fell below 2.5 percent.
Returns from U.S. bonds are closely watched by the gold market because the metal pays no interest.
MORE DATA WATCHING
Gold has gained about 7 percent from a three-month low hit on Oct. 15 after weak U.S. data and the repercussions of budget battles in Washington raised hopes the Fed would delay the winding-down of its USD 85 billion monthly bond purchases well into early 2014.
Investors will continue to monitor U.S. data in coming weeks, where continued weakness could add weight to the view that this month's political showdown in Washington has caused a setback in the nascent recovery.
Chinese gold prices recovered slightly on Wednesday after ending at a discount to global prices in the previous session for the first time this year. Fears of a credit tightening had prompted Chinese investors to sell bullion for cash.
"If this trend were to continue for any length of time, this could also lead to weaker Chinese gold imports," Commerzbank said.
Indian premiums stayed near record highs due to a supply crunch.
Spot silver mirrored gold's gains and was up 2.1 percent at USD 22.99 an ounce, having touched its highest since Sept. 20 at USD 23.06 an ounce earlier.
Spot platinum rose 0.8 percent at USD 1,472.49 an ounce. It touched an high of USD 1,471.50 earlier on prospects that strikes in South Africa could curb supply. Spot palladium gained 0.2 percent at USD 745.47 an ounce.