Gold gained overnight as the US dollar slipped after tame US inflation data supported the Federal Reserve’s ‘patient’ stance on interest rate hikes, while investors awaited a key Brexit vote.
Spot gold rose 0.4 per cent to $US1,298.63 per ounce, while US gold futures settled 0.5 per cent higher at $US1,297.70.
US consumer prices rose for the first time in four months in February.
However, the annual gain was the smallest in about 2-1/2 years, showing inflation remained low.
‘Weaker inflation data keeps the Fed’s potential to raise rates on the back burner. We don’t see a need for the Fed to be so hawkish at the moment, and that could have played a small hand in gold’s rally,’ said Phil Streible, senior commodities strategist at RJO Futures in Chicago.
‘The (US) dollar index’s weakness and uncertainty around Brexit are also driving prices.’
The US dollar fell compared with major currencies following the data, bolstering appeal for bullion.
Lower interest rates reduce the opportunity cost of holding non-yielding bullion and weigh on the US dollar.
The data ‘continues a theme of low and non-problematic inflation in major world economies, which is allowing central banks to keep interest rates low,’ Jim Wyckoff, senior analyst at Kitco Metals said in a note.
‘Gold and silver markets upticked following the report, which favours monetary policy doves.’
‘Safe-haven buying has mostly been localised, but a no-deal Brexit could trigger a more widespread flight to safety,’ Suki Cooper, precious metals analyst at Standard Chartered Bank, said in a note.
Reflecting investor sentiment, holdings in the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.4 per cent to 769.53 tonnes on Monday.
Gold is facing stiff resistance at the $US1,300 mark, having failed to significantly break above the key psychological ceiling, despite recent momentum on the back of the US dollar’s declines fuelled by weak US jobs data and modest retail sales in January.
Among other precious metals, palladium was up 0.3 per cent at $US1,540.01 per ounce, while platinum gained 1.2 per cent to $US834.55.
Silver advanced 0.6 per cent to $US15.41 per ounce, after touching its highest since March 1 earlier in the session.