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Gold climbs as dollar weakens

February 14, 2018

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LONDON: Gold rose for a second day on Tuesday as the dollar slipped in the face of a recovery in global equities, which dampened appetite for the US currency as a safe store of value.

A retreat in the dollar, in which the precious metal is priced, has helped gold to pull back nearly 2 per cent from last week’s one-month low of $1,306.81 an ounce. Spot gold was up 0.4pc at $1,328.44 by 1245 GMT, while US gold futures for April delivery were $4.30 an ounce higher at $1,330.70.

While bullion is sometimes seen as a haven from risk, it benefited little last week from the slide in equities as investors moving out of stocks broadly sought refuge in the dollar, trumping other drivers.

“Gold is moving up when risk appetite is improving, and that’s happening because the dollar is weakening — otherwise that should not happen,” said ABN Amro analyst Georgette Boele.

Global equities were up 0.3pc on Tuesday, with Asian shares rising from two-year lows overnight on the back of an extended rebound among Wall Street stocks after their biggest weekly drop in two years. Shares remained under some pressure in Europe, however, indicating caution in the market.

Investors are now awaiting US January inflation data, due on Wednesday, for clues on the next move in financial markets. Inflation is sometimes seen as gold-positive, because bullion is seen as a safe store of value at a time when price pressures are rising, but expectations that the US Federal Reserve will lift interest rates to fight inflation make the non-yielding metal less attractive. “Usually, if these readings are a bit higher than expected, that triggers some expectations for higher rates, which should support the dollar but will weigh on gold if you get yields moving up,” ABN Amro’s Boele said.

Among other precious metals, silver was up 0.5pc at $16.63 an ounce, while platinum gained 0.6pc to $976.50. Palladium was up 0.8pc at $992.70. The autocatalyst metal has slid nearly 14pc since hitting a record $1,138 in mid-January but remains at elevated levels on expectations that the market will remain in deficit for a while yet.

Published in Dawn, February 14th, 2018

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