Gold edged up in volatile trade on Thursday as positive economic data from China helped offset pressure from a rebound in the dollar after U.S. Treasury Secretary Tim Geithner defended the beleaguered currency.
China's growth ebbed in the third quarter and inflation edged just a touch higher, showing the economy was strong but far from overheating. It also suggested an interest rate rise this week may be enough for now.
Spot gold added 30 cents to $1,343.80 an ounce by 0320 GMT, having rebounded on Wednesday following reports that the Fed would buy bonds to inject money into the U.S. economy.
Gold was more than 3 percent below a lifetime high around $1,387 hit last week. It tumbled nearly 3 percent on Tuesday following China's surprise announcement of an interest rate hike.
\"I am still predicting $1,400 by the end of the year,\" said Mark Pervan, senior commodities analyst at ANZ in Melbourne, adding that physical demand from India and China was expected to support bullion.
\"The recent tightening announcement by China has sort of taken the market a bit by surprise. But (it) doesn't derail the weak U.S. dollar story and probably strong Chinese demand story.\"
Festival season in top consumer India is underway, with Dhanteras--the day the jewellers register the highest gold sales in a year--slated for early next month.
U.S. gold futures for December delivery was steady at $1,344.6 an ounce. It had dropped to a low of around $1,342.5, having reached an intraday high around $1,349.6.
\"The GDP figures are actually a bit positive, with a surprise on the upside. It could actually encourage a bit more of risk-taking which could weigh on the dollar. That could in turn be positive for gold,\" said a dealer in Singapore.
\"I guess it's a confluence of factors which affect the dollar. But I think gold may be well supported by the likelihood of a monetary easing by the United States. On a long-term basis, I would still see gold in the uptrend.\"
The dollar leapt half a yen and climbed against the euro on Thursday after U.S. Treasury Secretary Tim Geithner said major currencies were roughly in alignment now, although it later gave back some of its gains.
Consultancy Medley Global Advisors said the Fed planned to launch a program to buy $500 billion of U.S. Treasuries over six months and leave itself room for more purchases.
The world's largest gold-backed exchange-traded fund, SPDR Gold Trust said its holdings eased to 1,299.177 tonnes by Oct 20 from 1,300.089 tonnes on Oct 19. The holdings hit a record at 1,320.436 tonnes on June 29.
(Editing by Manash Goswami)
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