Gold continued to sustain its recovery on Monday, touching the strongest in nearly two weeks as the dollar weakened, the Chinese yuan rebounded and some investors reversed their bearish gold sentiments.
Spot gold rose 0.7 percent at $1,262.86 an ounce, its highest since June 26 while the US gold futures for August delivery rose 0.7 percent to $1,264.20 an ounce.
There has been a strong connection recently between the yuan and gold, according to analysts.
Georgette Boele, commodity strategist at ABN AMRO in a monitored report said: “I think most likely the yuan will remain volatile but I don’t expect aggressive weakness, so that means the only thing that is driving gold at the moment is the dollar, which is somewhat weaker”.
The yuan rose 0.5 percent in markets to 6.6292 against the dollar, further away from the lows it hit in June, its biggest monthly fall, while the dollar index weakened.
A weaker dollar makes greenback-denominated gold cheaper for holders of other currencies.
OCBC analyst Barnabas Gan said some investors had bought gold to cover their short positions.
“With the ongoing US-Sino trade tension, the resignation of David Davis, UK’s Brexit secretary will likely be a side-show, though it might raise some concerns among market-watchers depending on how the overall Brexit issue progresses,” Gan said.
It was unclear whether a rebound in spot gold would continue after it hit a seven-month low of $1,237.32 last week, Boele said. “This could already be the bottoming out, but I think you will still get another test lower, because we expect a recovery in the dollar and higher yields for the coming quarter.”
In other precious metals, silver rose 1.2 percent to $16.18 an ounce and platinum gained 2 percent to $857.50 an ounce. Both the metals hit their highest since June 27 during the session. Palladium gained 1.1 percent to $963.10 an ounce, its highest since June 21.