Gold prices edged higher Thursday to settle at a four-month high as the U.S. dollar took a turn lower for the week.
February gold GCG8, +1.19% tacked on $3.20, or 0.2%, to settle at $1,322.50 an ounce-the highest finish for a most-active contract since Sept. 15, FactSet data showed. The exchange-traded SPDR Gold Shares GLD, +1.21% was up 0.4%.
Gold has seen its "biggest start to a month since the U.S. presidential election in November 2016," said Adrian Ash, director of research at BullionVault. Gold futures have climbed roughly 1.1% month to date.
"It's always common to see a New Year bump in new private-investors demand for gold," he said. "January sees people rebalance and rethink risk, and that's driving both precious metals prices and investor interest to show a marked rise at the start of the year."
The ICE U.S. Dollar Index DXY, -1.08%-a gauge of the greenback against a half-dozen rivals-fell by 0.5% in Thursday trading, poised for a weekly loss of around 0.1%. Because most commodities are priced in dollars, weakness in the currency can provide support for assets like gold, boosting their appeal among buyers using stronger currencies. Conversely, a firmer dollar often prompts weaker gold trading.
The yellow metal typically moves inversely to Treasury yields, although it has broken that relationship during the big move higher for yields earlier week. Yields fell Thursday as a Chinese regulator denied a report from Wednesday that Beijing will scale back or halt its purchases of U.S. government debt.
The yield for the 10-year benchmark note TMUBMUSD30Y, +0.00%was down 1.5 basis points to 2.542% Thursday. It's still up around 3.5% week to date.
Bond market moves can ripple throughout other assets, with investors eyeing shifts in government paper after what has been a lengthy bond-market bullrun, which has resulted in prices climbing and yields, which move in the opposite direction, falling.
Gold "rising with equities isn't unusual. They go in the same direction around 50% of the time," said Ash. "But the move against T-bond prices is rarer, and it comes as gold has broken away from its strongest ever correlation with the Japanese yen."
"Early days yet, but the connections and correlations which traders have used to play gold's broad range over nearly 5 years now could be breaking down," he said.
Investors have been weighing persistently low inflation, as rising prices eat away at a bond's fixed value, against global central bank signals for higher interest rates, which can stoke selling in outstanding bonds as investors anticipate richer-yielding offerings.
Data Thursday, however, showed that U.S. wholesale prices rose in 2017 at the fastest pace in six years. A buildup in inflation could push the Federal Reserve to raise interest more aggressively.
In other metals trading, March palladium PAH8, +4.06% fell 0.1% to $1,076.25 an ounce. It cleared $1,098 this week for a settlement that was the highest on record, based on FactSet data going back to 1984.
Read: Palladium prices could top gold as record rally continues
April platinum PLJ8, +0.80% meanwhile, gained 1.2% to $990.80 an ounce.
March silver SIH8, +1.64% slipped 0.4% to $16.966 an ounce, while the iShares Silver TrustSLV, +1.62% lost 0.1%. March copper HGH8, -0.31% fell nearly 0.1% to $3.233 a pound.