Investing.com - Gold could form a solid base at the $1,250 level amid the narrative of a Europe in trouble and a Federal Reserve likely to pause rate hikes.
"Some economists over the pond have been quietly starting to use the word 'recession'," Walter Pehowich, executive vice-president at Dillon Gage Metals in Addison, Texas, said, referring to the combined challenges facing Europe's largest economies: Britain, France and Germany.
"Here in the U.S., day after day, the odds of a rate hike in December are starting to diminish," he added in his daily note on precious metals. "If they do raise rates in December, a PAUSE in the first quarter should be in order."
With the Fed's December rate hike decision exactly a week away, bets for a fourth increase in 2018 are less 80% after dovish signals from central bank speakers over the past two weeks.
Benchmark COMEXgold futures for February rose $2.80 to settle squarely at $1,250 a troy ounce on Wednesday on Brexit concerns, street protests in France and disquiet over Germany's immigration policies. With its latest session high of 1,252.25 closing in again on Friday's 5-month peak of $1,255.80, most gold watchers now believe the yellow metal has more than a fair chance of returning to April highs of above $1,300.
The pound initially tumbled against the dollar in European trading Wednesday on concerns about a potential vote of no-confidence British Prime Minister Theresa May. But the greenback slid in the U.S. session on the back-and-forth speculation over the Fed's near-term rates direction.
By 2:26 PM ET (19:10 GMT), the Dollar Index, a contrarian trade to bullion, was down 0.3% at 97.03.
Among other precious metals on COMEX, silver rose 1.4% to $14.83 per ounce.
Palladiumalso gained 1.4% to $1,194.10 per ounce, while sister metal platinum jumped 2.4% to $804.20.
In base metals, COMEX copper slipped 0.2% to $2.76 per pound.