Gold futures climb as US dollar, equities decline

Gold prices rallied to a three-week high on Tuesday, amid a decline in US equities and a weaker dollar.

Futures for April delivery were last marginally lower at $1,245.9 per troy ounce, after closing at $1,246.5/oz in Tuesday’s session. 

“Sell off in equities and weakness in dollar is supporting the bid for gold,” Dubai-based Emirates NBD said in a note on Wednesday.

The US dollar fell to a six-week low on Tuesday, while American equities also posted declines across the board. The Dow Jones index closed 1.1 percent lower, while S&P 500 was down 1.2 percent, and the Nasdaq Composite index fell 1.1 percent.

Gold prices have been on the rise since the US Federal Reserve hiked interest rates last week. Prices typically increase when market uncertainty prevails and stocks are volatile, as gold is regarded as a safe haven asset.

“The market had been pricing in potential of the Fed raising the projection for the number of future rate hikes. Instead the Fed kept the trajectory unchanged at two more rate hikes this year followed by 3+ in 2018,” Ole Hansen, head of commodity strategy at Saxo Bank, said in a note.

Last week’s interest rate hike helped trigger a recovery in bonds, while the US dollar touched a five-week low.

“Both of these developments help support a reversal of some of the gold and silver weakness seen ahead of the Fed announcement,” Hansen said.

“After gold survived another US rate hike and some stiff headwinds during the past few weeks, we sense that underlying demand, albeit not strong at this stage, will keep the market supported.”