Gold finished higher on Tuesday, rebounding from a two-week low early in the day on chart-based support and as investors covered short positions.
US gold futures for February delivery settled up $8.20 to $866.00 an ounce on the COMEX division of the New York Mercantile Exchange. Bullion dropped to a two-week low of $838.55 in early trade as the dollar extended its rally against the euro.
Gold rose, even as the dollar climbed further against the euro after a flash estimate of euro zone inflation came in weaker than expected, boosting pressure on the European Central Bank to cut interest rates at its Jan. 15 meeting.
A firm dollar reduces gold’s appeal. But the US currency trimmed gains after data showed US factory orders and pending home sales dropped more than expected in November.
While the stronger dollar and reports of lackluster jewelry sales weighed on prices, demand from exchange-traded funds — which issue securities backed by physical gold — remained firm.
ETF Securities, which operates Europe’s largest gold-backed ETF, said holdings of its Physical Gold exchange-traded commodity rose 2% in the week to January 2 to 1.899 million ounces.
Holdings of the world’s largest bullion ETF, the SPDR Gold Trust, held at a record 780.23 tonnes on Monday.