Gold ticked up on Thursday, helped by a softer dollar and Federal Reserve Chair Janet Yellen’s caution over US interest rate hikes, and was also set to record its best quarter in nearly 30 years.
Bullion rallied sharply since this year as worries over global economic growth and a slowdown in China shook up stock markets, triggering safe-haven demand for the yellow metal.
It has gained 15.6 per cent in the first three months of the year, its strongest such performance since the third quarter of 1986.
Spot gold had risen 0.2 per cent to $1,226.24 an ounce by 0322 GMT. After a near 11-per cent rise in February, gold prices are down about 1 per cent in March.
“It is difficult to get bearish on gold at this stage given that the Fed has made it quite clear that it is reluctant to raise rates, this despite signs that the US economy is doing fairly well,” said Edward Meir, analyst, INTL FCStone.
“As a result, the dollar is not rallying on constructive macro releases, and we have to suspect that its weaker tone will limit any substantial declines in gold for the time being.”
Investors gave the dollar a wide berth early on Thursday as dovish comments from Yellen continued to resonate, dampening demand for the currency.
Yellen’s cautious tone
Yellen had said on Tuesday the US central bank should proceed only cautiously as it looks to raise interest rates.
The comments boosted the sentiment with investors, who had sold off gold and equities after a few Fed officials said that another rate hike could be just around the corner. The Fed had raised rates in December for the first time in nearly a decade.
Gold as a non-interest yielding asset benefits from lower rates. Gains in the metal were capped by a rally in global equities.
Asian shares edged up to a four-month high on Thursday, as receding worries of near-term US interest rate hikes continued to buoy the risk sentiment.
Gold had gained nearly 2 per cent on Tuesday immediately after Yellen’s dovish remarks, but fell 1.4 per cent at the following session as stronger equities triggered profit-taking.
Assets in SPDR Gold Trust, the world’s top gold-backed exchange-traded fund, fell for a second straight session to 819.28 tonnes on Wednesday. Holdings are still near their highest in over two years.