Gold edges higher on US election nerves

Gold edged higher on Thursday in response to a lower dollar and also uncertainty about the outcome of a tight US presidential race.

Democrat Hillary Clinton maintained her narrow lead over Republican rival Donald Trump just days ahead of the November 8 election, according to two polls released on Thursday.

Global equity prices, rattled by worries about the US presidential election, steadied while the US dollar was down around 0.3 per cent against a basket of six main currencies. 

"Risk-off sentiment has helped gold above $1,300 yesterday ... and as long as uncertainty around the outcome of US elections continues, we can see support," Saxo Bank head of research Ole Hansen said.

Spot gold , lower initially, rose 0.4 per cent to $1,302.17 an ounce by 2:52 pm EDT (18:52 GMT), remaining below Wednesday's one-month high of $1,307.76.

US gold futures settled down 0.4 per cent at $1,303.30 per ounce.

"Given the recent moves in the polls and the commensurate improving chances of (Republican Donald Trump) winning according to major forecasters, the possibility of a Trump presidency, which is gold-positive according to the market given likely changes in global investor risk appetite, has been priced back in, at least partially contributing to gold's recent rise," said RBC Capital Markets in a note.

Citi Research said it expects gold prices to remain sensitive to the US presidential polls and major news headlines in the short run.

The Fed kept rates unchanged on Wednesday but expressed optimism that inflation was moving towards their 2 per cent target.

"The fact that the Fed made some hawkish comments opening up to a rate increase in December could be seen as a negative for gold," Mitsubishi Corp analyst Jonathan Butler said.

Gold is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets, while also boosting the dollar, in which the metal is priced.

The market will now focus on the government's non-farm payrolls data, which will be released on Friday. 

"Even bad data won't change the idea of a rate hike as the Fed has shown that there is a high probability for a rate hike in December," Jiang Shu of Shandong Gold Group said.

Among other precious metals, silver fell 0.7 per cent at $18.32 an ounce, retreating from a high of about $18.73 on Wednesday, its best level since October 4.

Platinum was up 0.8 per cent at $994.75 and palladium dropped 1.9 per cent at $616.50.