Gold gains 1% as Wall Street rally fizzles, dollar dips

By Asha Sistla

(Reuters) - Gold rose more than 1% on Thursday as the dollar retreated and Wall Street paused its recent rally as dismal U.S. trade data overshadowed slightly upbeat labor market numbers and optimism about an economic rebound.

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Spot gold was up 1.1% to $1,716.60 per ounce at 12:38 p.m. EDT (1638 GMT). U.S. gold futures rose 1.1% to $1,723.20.

"Equity markets are still trading in the red and for gold market participants, that's interpreted as a bout of risk-off and is leading to an increase in investment demand," said Daniel Ghali, commodity strategist at TD Securities.

After a strong rally on Wednesday, U.S. stock indices edged lower despite data showing U.S. weekly jobless claims dipped below 2 million for the first time since mid-March.

Re-igniting worries about an economic slowdown, the U.S. trade deficit surged in April as the COVID-19 pandemic upended the global flow of goods and services, pushing exports to a 10-year low.

The dollar also held near its lowest level in about three months, making gold cheaper for holders of other currencies.

While gold has shown it can rally in a risk-on environment as well, "an equity market correction could also weigh on gold in the near term should liquidity needs materialise again," Standard Chartered analyst Suki Cooper said in a note, forecasting prices to average $1,700 in the third quarter.

Earlier in the day, the European Central Bank beefed up its bond-buying programme to support the euro zone economy, briefly boosting equities.

Holdings in the SPDR Gold Trust ETF rose to 1,133.37 tonnes on Wednesday, the highest since April 2013.

Gold-backed exchange-traded funds (ETFs) added 623 tonnes of the metal worth $34 billion to their stockpile from January to May, exceeding in five months every full-year increase on record, the World Gold Council said on Thursday.

Elsewhere, palladium fell 2.7% to $1,897.02 per ounce, while platinum climbed 1.2% to $835.88. Silver rose 0.5% to $17.75.

(Reporting by Asha Sistla in Bengaluru; Editing by Steve Orlofsky and Paul Simao)

This story has not been edited by Firstpost staff and is generated by auto-feed.