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Gold rises back towards three-month high, markets eye Fed minutes

(Reuters) - Gold firmed on Thursday, edging back towards the three-month peak it reached earlier in the week on the back of dollar weakness, with the market focusing on minutes of the U.S. Federal Reserve’s December policy meeting.

A gold bar is pictured in the safe deposit boxes room of the Pro Aurum gold house in Munich, Germany, August 14, 2019. REUTERS/Michael Dalder/File Photo

Spot gold was up 0.4% to $1,523.12 per ounce as of 1248 GMT, having touched its highest since Sept. 25 at $1,525.20 on Tuesday. U.S. gold futures were up 0.2% at $1,525.80.

“We are seeing a bit of a bounce-back in the dollar but if you look at the movements that we saw (in the past few days), it is probably supporting gold in the interim,” said OANDA analyst Craig Erlam.

The negative correlation between the dollar and bullion is what really propelled gold from $1,480 to $1,520, he said, but further upside in the U.S. currency could put pressure on gold.

Against key rivals, the dollar was up 0.3% this session, but was trading not far from the six-month low it touched on Tuesday.

Beijing’s decision to ease monetary policy further supported bullion, Erlam added.

China’s central bank on Wednesday said it was cutting the amount of cash that all banks must hold as reserves, releasing funds to shore up the slowing economy.

Bullion prices posted their biggest annual rise in nearly a decade in 2019, boosted by the drawn-out trade war between the United States and China that dragged on global economic growth.

Many analysts said prices were likely to rise further in 2020, with shaky growth and global stock markets potentially looking unsustainable at record highs.

“A key thing to look out for is stock markets, which have been setting new highs,” said Brian Lan, managing director at dealer GoldSilver Central in Singapore. “In case there is some correction, we (could) see some capital flows into gold.”

Brexit, the U.S. presidential election, protests in Hong Kong and tensions with North Korea would be the other key factors for the market this year, he said.

Investor focus has now turned to the minutes of the Federal Reserve’s Dec. 10-11 policy meeting, due at 1900 GMT on Friday. Lower interest rates encourage the buying of non-interest-paying bullion.

“Friday’s U.S. manufacturing ISM and the December Federal Open Market Committee (FOMC) minutes could provide an impulse,” Stephen Innes, a market strategist at AxiTrader said in a note.

Among other precious metals, silver gained 0.5% to $17.92 per ounce, while platinum rose 1.7% to $979.65 and palladium edged up 0.4% to $1,947.37 per ounce.

Reporting by K. Sathya Narayanan and Sumita Layek in Bengaluru; Editing by Jan Harvey