Melbourne - Gold extended a rally from a seven-week low as Chinese buyers returned from a week-long holiday and investors assessed the outlook for the Federal Reserve raising interest rates in the US before inflation data.
Bullion for immediate delivery rose as much as 0.7 percent to $1,213.23 an ounce and was at $1,212.37 at 2.29pm in Singapore, according to Bloomberg generic pricing. Gold rose 0.4 percent on Wednesday, rebounding from a seven-week low of $1,190.52 on February 24.
Fed Chair Janet Yellen, testifying to a Senate committee on Tuesday, indicated that a change in guidance on borrowing costs won’t lock policy makers into a timetable, helping US stock gauges advance to a record. The Fed’s existing pledge to be “patient” on beginning to raise rates means an increase is unlikely for “at least the next couple” of meetings, she said. While the labour market is improving, inflation and wage growth remain too low, according to Yellen.
“Chinese traders returning from their week-long Chinese New Year holiday, plus the temporary dip below $1,200 on Tuesday, prompted bargain hunting and short-covering in gold by investors,” Howie Lee, an investment analyst at Phillip Futures Pte, wrote in a note. Short-covering refers to investors ending bets on losses. “The key release to note today will be the release of US CPI.”
Inflation data
Data on Thursday may show consumer prices in the world’s largest economy dropped in January, according to economists’ estimates compiled by Bloomberg. Yellen has said the central bank will need to be “reasonably confident” inflation is rising back toward its goal before starting to raise rates.
Gold prices were also boosted by a weaker US dollar, Australia & New Zealand Banking Group Ltd wrote in a note. The Bloomberg Dollar Spot Index, a gauge of the currency against 10 major peers, fell for a second day on Wednesday and is down 0.3 percent this week. Gold typically trades counter to the dollar, while higher interest rates curb bullion’s appeal as the metal generally gives returns only through price gains.
Volumes for the Shanghai Gold Exchange’s benchmark spot contract more than doubled on Wednesday from February 17 as investors in China, the world’s second-biggest gold consumer, returned from the holiday.
Gold for April delivery rose 0.9 percent to $1,212 an ounce on the Comex. Silver for immediate delivery added 0.6 percent to $16.6725 an ounce. Spot platinum climbed 0.8 percent to $1,180.25 an ounce, while palladium advanced 0.4 percent to $811.55 an ounce.
Bloomberg