Gold picked up during late Asian trade on Thursday after data showed that China's manufacturing sectors expanded at the fastest pace in seven months.
The precious metals markets bounced back in the wake of new signs of stabilization in the world`s second largest economy. The preliminary Markit/HSBC Manufacturing Purchasing Managers Index (PMI) stood at 50.9 in October, topping September`s final reading of 50.2 and setting a seven-month high. The positive news lifted gold prices towards four-week highs.
Spot Gold reversed yesterday`s losses rising 0.16% to $1,335.58 an ounce at 02:03 EST today, compared with previous close at $1,333.47. Meanwhile, the yellow metal is trading in a mid-range of $1,330.48 and $1,337.28.
The strong PMI number boosted expectations again for the second-largest economy as analysts see Chinese growth slowing on weak global demand.
A wave of selling was triggered yesterday after Bloomberg reported that Chinese banks have had to triple the bad debt write offs, preparing for fresh wave of defaults in the world`s second largest economy.
Worries over the Chinese banking sector weighed on markets yesterday, a day after US jobs data fueled bets that the Federal Reserve won`t be reducing its monetary stimulus anytime soon.
The Fed's accommodative monetary policy and especially its economic stimulus program often weaken the dollar to drive recovery, stripping gold off its attractive hedge appeal against inflation.