Gold prices Thursday extended last month's rally after positive manufacturing data from China, Europe and the U.S. and Greece appeared just days from a settlement with its creditors.
A spokesman for the Greek government said debt negotiations have resolved most outstanding issues and the remaining items could be resolved by the end of this week. The International Monetary Fund confirmed that negotiations are expected to reach a successful conclusion this week.
In the U.S., economic data supported market sentiment. The private Institute for Supply Management said Wednesday manufacturing rose last month by the most in seven months, and the Commerce Department said construction spending increased in December for the fifth straight month.
Manufacturing also outside the U.S. Purchasing managers' indexes from Great Britain and China showed manufacturing expanded faster in January than most economists expected, according to a Bloomberg survey.
Major Chinese and Japanese stock indexes rose, led by the Hang Seng's two percent surge. European equities were slightly lower. Futures on the Dow Jones Industrial Average, the Nasdaq 100 and the S&P 500 indicated that U.S. stocks would open flat.
The euro was off slightly but remained above $1.31, while the Dollar Index, which measures the greenback against a basket of major currencies rose 0.8 percent off eight-week lows.
Our near-term upside target is $1,780. We think that's going to be taken out within the next six weeks or so, Nick Trevethan, a senior commodity strategist at ANZ in Singapore, told Reuters.
But we remain cautious about end of the quarter fund redemptions, particularly equity redemptions which have linkages to gold. Those funds, we believed, caused the sharp downturn in gold at the end of Q3 and Q4.
Prospects that February will extend last month's 10 percent gain in gold's price prompted speculation that the yellow may be recovering its safe haven status and, thus, becoming less dependent on stock market movements.
While gold's 20-day rolling correlation with risk has jumped back into positive territory, the level continues to hover near the lower end of the range, UBS analyst Edel Tully said in a note. That this relationship remains soft is reflected in the fact that gold underperformed yesterday in the midst of a risk rally, but outperformed the previous day as risk retreated. Gold appears in the process of convincing investors that its stint as a hybrid between a safe haven and a risk asset is coming to an end.
Gold for April delivery gained $50 cents to $1,750, while spot gold rose $1.35 to $1,747.32.
Silver for March delivery slipped 21 cents to $33.60, and spot silver fell 16 cents to $33.62.