Gold rises as price drop tempts physical buyers

New York (Nov 20)   Gold rose on Thursday on data showing rising U.S. inflation, and after the previous day's 1-percent drop triggered renewed physical interest by price-sensitive Asian buyers.

Bullion investors focused on U.S. Labor Department data which showed underlying inflation pressures rose in October, even though that also bolstered expectations of a mid-2015 interest rate hike from the Federal Reserve.

The gold market also ignored other data that showed a strengthening U.S. economy, including rising existing home sales and lower weekly jobless claims.

Bullion dropped on Wednesday after a poll showed weaker support among Swiss voters for a referendum proposal that would force the central bank to boost its gold reserves.

Dealers said appetite for physical gold among Asian buyers surged after prices fell to a low of $1,175 an ounce.

"We have certainly seen physical demand pick up on dips over the last couple of weeks after gold's aggressive sell-off," said David Meger, director of metals trading at brokerage Vision Financial Markets in Chicago.

Spot gold was up 0.7 percent at $1,191.44 an ounce by 1:55 p.m. EST (1855 GMT), while U.S. gold futures for December delivery settled down $3 an ounce at $1,190.90.

Earlier this month it slid to a 4-1/2 year low at $1,131.85.

The dollar index eased on Thursday, but the currency held near a seven-year high versus the yen as investors bet that the Federal Reserve will start raising interest rates next year while the Japanese central bank maintains stimulative policies.

A stronger dollar tends to weigh on gold, which is priced in the U.S. unit.

Selling by gold funds resumed after a brief pause this week. The world's largest gold-backed exchange-traded fund, SPDR Gold Shares, said its holdings fell 0.3 percent to 720.91 tonnes on Wednesday.

Gold exports to China from Switzerland, a major trading and refining center, more than tripled to 42.5 tonnes last month, Swiss customs data showed.

Among other precious metals, platinum briefly slipped into a discount to gold for the first time since mid-October before recovering to trade at a premium of about $10 an ounce.

Platinum was up 1.7 percent at $1,202.50 an ounce, while palladium climbed 1 percent to $768 an ounce.

Silver was up 0.3 percent at $16.15 an ounce.

Source:  Reuters