Gold climbed above $1,300 an ounce to a fresh five-month high on Wednesday as a softer dollar, worries over the global economy and uncertainty over whether the European Central Bank (ECB) would announce stimulus measures fuelled safe-haven bids.

Quantitative easing

Financial markets have been nervous about Thursday’s ECB meeting, at which the bank is widely expected to unveil a quantitative easing programme.

That is likely to boost the demand for bullion, but investors are treading with caution on the impact any measures might have on the euro. The metal has done well recently, despite the euro’s trading near 11-year lows.

“Bullion’s recent divergence from moving in tandem with the euro to the opposite of the euro is attributed to its appeal as a perceived safe-haven asset,’’ HSBC analyst James Steel said.

“While we do not discount further safe-haven-inspired gains in gold, the yellow metal may be in need of a price consolidation, given its 9 per cent gain in less than three weeks of trading so far this year," Steel said, adding that softer physical buying might also keep a lid on prices.

Spot gold

Spot gold was up 0.7 per cent at $1,302.30 an ounce by 0541 GMT, just off a session high of $1,302.80. That was its loftiest level since Aug. 18.

The dollar lost some ground as the yen strengthened after the Bank of Japan kept its monetary policy steady.

Safe-haven and technical buying was behind gold’s 1 per cent jump on Tuesday.

Greece elections

Bullion has performed well since the beginning of the year as its safe-haven appeal has been burnished by uncertainties in Europe. Traders are now eyeing Sunday’s snap election in Greece. Polls suggest anti-bailout party Syriza will win, which may set off fresh turmoil in the euro zone.

IMF growth forecasts

Worries over the health of the global economy have added to gold’s demand. On Tuesday, the IMF had cut its forecast for global growth in 2015 and called on governments and central banks to pursue accommodative monetary policies and reforms.

Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, jumped 1.55 per cent to 742.24 tonnes on Tuesday.

Other precious metal prices also rose along with gold.

Spot silver jumped more than 2 per cent on Wednesday, gaining nearly 17 per cent so far this month. Palladium rose 1 per cent to stretch its wins to a third session, while platinum climbed 0.6 per cent.

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