LONDON (Oct 8): Gold rose 1 percent on Wednesday as stock markets fell for a second day, with a cut in the International Monetary Fund's global growth forecasts fuelling concerns over the world economy.
European stocks hit 1-1/2-month lows, and world share indexes pushed back towards their lowest in six months, while German bond yields slipped towards record lows as concerns over global growth spurred demand for safe-haven debt.
Spot gold was up 0.9 percent at $1,219.30 an ounce at 0923 GMT, having earlier touched a high of $1,220.40. U.S. gold futures for December delivery were up $7.50 an ounce at $1,219.90.
The metal earlier this week had plunged to its lowest since mid-2013 at $1,183.46 after upbeat U.S. jobs data boosted the dollar and stocks and buoyed expectations that the Federal Reserve will keep scaling back its ultra-loose monetary policy.
It has since rebounded as stock markets have lost traction and the dollar has retreated from highs. As Chinese markets returned from a one-week holiday on Wednesday, traders said the metal could benefit from fresh physical demand.
"Precious metals are finding support from several corners today. Stock markets are once again showing signs of weakness, while U.S. bond yields are moving lower once again," Saxo Bank's head of commodity research Ole Hansen said.
"Adding to this is a sense that the dollar now may need a bigger correction before buying resumes, while the return of China to these lower levels have raised expectations about demand," he added. "At the moment volumes are not really picking up ... in order to attract a major round of short-covering we need to see the price above $1,224."
Markets will be eyeing minutes of the Fed's last policy meeting due later on Wednesday for clues on when the U.S. central bank could raise rates. Higher rates would dent demand for gold, a non-interest-bearing asset.
Bullion investors were keenly watching the Shanghai Gold Exchange to gauge buying interest in China, the top consumer of the metal.
Premiums on the exchange, the platform for all physical trades in China, were about $5-$6 an ounce above global spot prices on Wednesday, compared with about $3 before Chinese markets closed for the holiday.
"Ultimately what matters is what consumers and market participants in China think gold prices will do from here," UBS said in a note on Wednesday. "The view that gold is currently trading near the bottom would encourage buying, while expectations of further downside would keep buyers on the sidelines to wait for more attractive prices."
UBS added, "The sense we are getting is that while investors are likely to have more mixed views, consumers who are faced with a local gold price which is 13 percent below the peak this year may be finding value here."
Among other precious metals, silver was up 1.7 percent at $17.43 an ounce, while spot palladium was up 1.9 percent at $794.25 an ounce and spot platinum was up 1.7 percent at $1,272.75 an ounce.
Platinum tumbled to a five-year low at $1,183.25 on Monday as gold prices weakened but has since seen a solid rebound. It is currently up 4.5 percent this week, and is on track for its biggest weekly rise in a year if those gains are sustained.