Gold jumped to a three-week peak on Tuesday on expectations the Federal Reserve will not raise US interest rates soon and as the dollar traded close to its lowest in nearly eight months, though profit-taking chipped away at some recent gains.
The US currency has been on the back foot since Fed Chair Janet Yellen had last month doused the expectations for hikes in US interest rates anytime soon, making dollar-priced commodities cheaper. Lower rates underpin the demand for non-interest-yielding bullion, while hurting the dollar.
Spot gold rose to $1,259.66 an ounce early on Tuesday, its highest since March 18. However, it pared gains to trade down 0.3 per cent at $1,254 an ounce by 0306 GMT, on profit-taking following a 1.4-per cent overnight gain.
US gold futures climbed to a three-week top of $1,261.90.
“While policy uncertainty is supportive of gold, it is the currency markets that we look to, to wield the biggest influence on bullion,” HSBC said in a note.
Dollar index
The dollar remained on the defensive on Tuesday after slumping overnight to its lowest since August against a basket of major currencies and a 17-month low against the Japanese yen.
The dollar index has shed nearly 3 per cent after recent dovish comments by Yellen.
Scaled-back expectations for further monetary tightening this year helped gold to its best quarter in nearly 30 years in the three months to March, after the US central bank had raised rates in December for the first time in nearly a decade.
Safe-haven demand
Gold has also been buoyed by some safe-haven demand. Weak economic data and uncertainty over US monetary policy has contributed to risk aversion, boosting investors’ appetite for bullion and other assets perceived as safer stores of value, including the Japanese yen. ‘
In the near term, gold’s rally could be capped following recent sharp gains.
“We expect profit-taking in gold at these levels with $1,250 to be supported,” said MKS Group trader Jason Cerisola. Some selling was seen in other precious metals as well on Tuesday.
Silver dipped 0.5 per cent after rallying nearly 4 per cent on Monday in its biggest single-day jump in six months. Platinum eased as much 0.6 percent following a 2-per cent jump overnight. Palladium was steady at $545.75 an ounce.