Updated from 12:40 p.m. EDT
Gold and metals rose on Thursday, continuing a bounce from Tuesday's sell-off, as oil advanced, the dollar fell, and Wall Street seemed to shake off recent jitters over higher rates.
Gold for August delivery rose $3.80, or 0.67%, to $570.30 an ounce.
Among other metals, silver for July delivery gained 23 cents, or 2.4%, to $9.97 an ounce and copper for July delivery gained 15.2 cents, or 5%, to $3.13 a pound.
"We think we've seen a near-term bottom after the steep sell-off in the precious metals," writes Frederic Panizutti, metals analyst at MKS Finance in Geneva.
Commodities and the broad market have been rocked over the past month amid fear that the
and other central banks are lifting rates to curb growth and inflation pressures, notably from the surging price of commodities.
Hawkish talk from the Fed last week helped prop up the dollar, which had been in a declining trend since late last year. A stronger dollar pressures dollar-denominated commodities, such as gold, as it takes less of the currency to buy the same amount of gold.
Over the past month, both gold and copper have dropped over 20% from their May highs, while silver has lost nearly 30%.
But besides expectations of a Fed rate hike at the end of June and perhaps in August, the dollar faces strong headwinds from the U.S. economy's structural problems, such as the current account deficit. The dollar may be close to "overdose," according to Ashraf Laidi, foreign exchange strategist at MG Financial.
"Boosted predominantly by an overdose of inflationary data and the Fed's justifiably hawkish rhetoric, the U.S. dollar may be tested by the law of diminishing returns as it encounters an array of potentially weak US data," he writes in a note.
The Dollar Index, which tracks the greenback against a basket of key currencies, was recently down 0.2%.
The dollar took a hit after news that foreign purchases of U.S. securities fell more expected to $46.7 billion in April from $60 billion in March. The drop represents "a continued trend of falling foreign capital inflows
which, if the trend continues, are dollar bearish," according to Jason Schenker, economist at Wachovia.
Other U.S. economic data released on Thursday painted a mixed picture. On the strong side, economic activity in the New York region in June was smaller-than-expected, while weekly jobless claims fell. But industrial production and capacity utilization dropped in May.
According to Laidi, July "will likely prove to be an especially dismal month for the dollar, as not only there is no scheduled
Fed meeting (de facto rate pause), but also will reveal the advanced
second-quarter GDP, likely to show growth slowing sharply to 2.7%-2.9% from 5.3% in
the first quarter."
Fear that the Fed might hike rates too much amid rising inflation pressures seemed to abate following Wednesday's news of slightly stronger-than-expected May consumer prices.
The market was expecting a bad number, which might have fueled new jitters about further rate hikes beyond June and August. The market now fully expects a June rate hike and prices in 80% odds of a hike in August, according to Miller Tabak.
But "all the news of inflation are now behind us," writes Chintan Karnani, metals analyst at New Delhi, India-based Insignia Consultants. "Most of the major market economic moving news are now behind us and markets will wait for the Fed meeting."
Expectations of a few more rate hikes from the Fed in an economy which remains strong leaves room for markets to aim for the "goldlilocks" scenario of a slowing economy amid low inflation, at least for now.
Yet, the possibility of stagflation -- a slowing economy in an inflationary environment - actually creates a good environment for gold, which serves as a safe-haven asset, according to Jon Nadler, investment products analyst at bullion dealer Kitco,
Gold bugs, he writes, are "making the argument that the best gold market cycle in decades has taken place precisely during the same period in which about dozen and a half Fed rate hikes were placed as scaffolding around the crumbling U.S. dollar with (thus far) not much of an effect on accelerating inflation and (at the same time) slowing spending and employment sectors."
In the meantime, the market also focused on signs of still-strong global growth, notably from China and India.
Wednesday's news that oil imports in China, the world's largest consumer of crude after the U.S., jumped 19% in May while Chinese industrial production surged 17.9%, continued to boost the price of crude on Thursday.
July crude was recently up 36 cents at $69.50 a barrel. Gold, which acts as a hedge against inflation, has tended to benefit as oil prices have soared.
Meanwhile, shares of metals miners were sharply higher in recent action, extending earlier gains as Wall Street staged an afternoon rally. The Philadelphia Gold and Silver index was up 4.7%, the Amex Gold Bugs index was up 5.8% and the CBOE Gold index was up 5.4%.
Among the biggest gainers,
was up 7.5%, while both
were up 7%.
The newly launched
Market Vectors-Gold Miners
exchange-traded fund, which tracks the performance of the
Amex Gold Miners Index
, was up 5.2%.
ETFs tracking the metals themselves were also rising. The
iShares Silver Trust
was up 4.7%, and the
StreetTRACKS Gold Trust
was up 2%.