NEW YORK/LONDON (Reuters) - Gold prices rose to a one-year peak on Thursday after the dollar tumbled on the back of weak U.S. jobs data and an unchanged growth and inflation outlook from the European Central Bank.
The dollar index .DXY, which measures the greenback against a basket of six major rivals, fell as much as 1.1 percent to its lowest since January 2015 of 91.405.
Spot gold XAU= climbed to an intraday peak of $1,349.49 an ounce, the strongest since September 7 2016, before paring gains to $1,348.26 by 4:18 p.m. EDT (2018 GMT), a rise of 1.1 percent. It eased 0.3 percent in the previous session.
U.S. gold futures GCcv1 for December delivery settled at $1,350.30.
The number of Americans filing for unemployment benefits jumped to its highest in more than two years last week amid a surge in applications in hurricane-ravaged Texas, sending the dollar lower.
Also pressuring the dollar on Thursday was a resurgent euro, which was set for its biggest 1-day gain against the dollar EUR= since Aug. 25 after the European Central Bank broadly stuck to its outlook for growth and inflation. [FRX/]
“ECB President Draghi’s comments bruised the already wobbly dollar which propelled gold to fresh highs of the current rally,” said Tai Wong, director of base and precious metals trading for BMO Capital Markets in New York.
“Gold often benefits from dollar weakness but that reverse correlation has been particularly strong in recent weeks. Today, the chart of gold and the dollar index is quite literally a mirror image.”
Higher interest rates tend to boost the dollar and push up bond yields, putting pressure on gold prices by increasing the opportunity cost of holding non-yielding bullion.
Continuing tensions with North Korea over its nuclear tests provided further support for safe-haven gold.
“Geopolitical tensions remain elevated surrounding North Korea, so I’d expect that would keep gold pretty well supported in the short term and in the week ahead,” said Jonathan Butler, commodities analyst at Mitsubishi in London.
China agreed on Thursday that the United Nations should take more action against North Korea after its latest nuclear test, while also pushing for dialogue to help ease tensions.
The market will soon start to shift its focus to the next U.S. Federal Reserve’s next monetary policy meeting, due to begin on Sept. 19.
“I expect some downward pressure on gold starting next week and a rebound in the dollar short-term,” said Samson Li, an analyst with Thomson Reuters-owned metals consultancy GFMS.
Silver XAG= rose 1.5 percent to $18.104 an ounce, while platinum XPT= rose 1.3 percent to $1,016.10 an ounce.
Palladium XPD= added 1.65 percent to $955 an ounce.
Additional reporting by Apeksha Nair in Bengaluru; Editing by Greg Mahlich and James Dalgleish