Gold firms at 2-week high as dollar turns lower

Gold futures turned higher after a bumpy start Thursday, testing a return to what was the highest finish in two weeks a day earlier, as a leading dollar index gave up early gains in the wake of global central bank news and U.S. economic data.

Among the early headlines, the Bank of England left rates untouched as it noted some concern for slowing global growth. The European Central Bank, as well, stood pat on policy as expected. Turkey’s central bank raised a key lending rate in an effort to thwart the deterioration of its currency’s value.

And on the data front, a measure of consumer-level inflation climbed but did so at a slower pace, while the weekly check-in on jobless benefits claims slipped but held near a 49-year low.

All told, the dollar flashed red as morning trading progressed, a boost to the precious metal that is priced in the U.S. unit, as gold becomes more attractive to investors using another currency.

December gold GCZ8, +0.44%  was up $2.30, or 0.2%, to $1,212.90 an ounce and has ranged so far between roughly $1,208 and $1,214 in choppy trading. The contract settled at $1,210.90 Wednesday—the highest since Aug. 29, according to FactSet data.

The ICE U.S. Dollar Index DXY, -0.37%  slipped 0.2% at 94.58. It has climbed nearly 3% year to date, accounting in large part for gold’s over 9% drop in the same stretch.

Gold prices pushed higher after hours Wednesday shortly after the release of the Federal Reserve’s Beige Book revealed weaker growth in August as the overall domestic economy expanded at a “moderate pace.” The Fed is expected to nudge its own benchmark interest rate higher yet again when it meets later this month and likely in December as well, a dollar-positive and gold-negative development.

Yet with recent churning for precious metals, “we remain constructive on gold and continue to see the risk to the bear camp,” said Peter Hug, global trading director at Kitco Metals. “Interest rates still favor the dollar but any conciliation on the trade front should mitigate dollar flows from a safe-haven perspective.”

“This is certainly not an all clear for gold, but it looks like the bottom has been established in August,” Hug added. “The shorts will become increasingly restless should gold break above $1,212 and given the amount of short interest in the market, the exit door is growing smaller.”

Gold has also been buffeted by concerns that clashes between the U.S. and China could lead to slack in demand for the metal and could raise interest in the dollar. The Wall Street Journal on Wednesday reported that the U.S. is reaching out to China for a new round of trade discussions, ahead of the Trump administration’s plans to place more tariffs on Chinese imports.

Meanwhile, December silver SIZ8, +0.43% fell 0.2% at $14.27 an ounce. That is still above the $14.05 settlement earlier this week, the lowest since January 2016.

Providing critical information for the U.S. trading day. Subscribe to MarketWatch's free Need to Know newsletter. Sign up here.