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Gold held on to the previous session's gains on Wednesday as Asian stocks stumbled and weak U.S. economic data undermined expectations of a near-term interest

Spot gold was up slightly at $1,364.15 an ounce by 0625 GMT, after hitting a high of $1,367.33, its loftiest since July11, in the previous session.

Global holdings of gold by exchange-traded funds have now hit their highest level in three-plus years after another large inflow on Monday, says Commerzbank. “While speculative financial investors are clearly withdrawing from gold, ETF investors are remaining loyal to gold,” the bank says. “They bought 8.4 tonnes of gold yesterday, which was the highest daily inflow in three weeks and the fourth consecutive daily inflow. This puts holdings in the gold ETFs tracked by Bloomberg at their highest level in over three years.”

Movement in the U.S. dollar is the key driver for gold prices, says Citi Research. The yellow metal historically has had a tendency to move inversely to the greenback. “Analysis of the key drivers of gold price returns affirms a close relationship between the U.S. dollar and gold,” Citi says. “Citi’s global commodity team has modeled gold returns using a linear regression on the returns of several key macro variables including the S&P 500, U.S. two-year rates, CPI (consumer price index) and the U.S. dollar index, fitting models over a rolling window of 48 months. During the period from 2000 to May 2016, the average standardized coefficient from the fitted models is considerably stronger for the U.S. dollar than for all other variables.” On that front, the bank adds that Federal Reserve interest-rate policy likely will be the biggest driver of the dollar and gold prices going forward. “Any rate hike in 2016 would be bearish for gold,” Citi says. “Continuing low rates would be supportive of current prices.”

Reference: Kitco,Reuters