Gold climbs 1% on delayed Fed rate hike outlook

Investing.com – Gold extended gains from the recent session on Thursday to trade just below a one-week high, as recent comments from Federal Reserve Chair Janet Yellen prompted investors to push back expectations for a rate hike in the U.S.
On the Comex division of the New York Mercantile Exchange, gold futures for April delivery jumped $10.60, or 0.88%, to trade at $1,212.10 a troy ounce during European morning hours after hitting an intraday high of $1,213.80, the most since February 20.
A day earlier, gold tacked on $4.20, or 0.35%, to settle at $1,201.50.
Futures were likely to find support at $1,190.00, the low from February 24, and near-term resistance at $1,215.30, the high from February 20.
Meanwhile, silver futures for May delivery rallied 23.6 cents, or 1.43%, to trade at $16.71 a troy ounce. Prices jumped 24.1 cents, or 1.48%, on Wednesday to close at $16.47.
Investors scaled back expectations for a mid-year rate hike after Yellen said in testimony to the Senate Banking Committee Tuesday that it was “unlikely” that economic conditions would warrant an interest rate increase for “at least the next couple of FOMC meetings”.
She added that if the economy keeps improving as the Fed expects it will modify its forward guidance, but emphasized that a modification of its language should not be read as indicating that a rate hike would automatically happen within a number of meetings.
In a second day of testimony to the Financial Services Committee on Wednesday Yellen reiterated this message, saying that wage growth and inflation must rise before the bank can hike rates, despite signs of improvement in the labor market.
Market analysts said the testimony gave the Fed more flexibility to hike rates later than June of this year.
A delay in raising interest rates would be seen as bullish for gold, as it decreases the relative cost of holding on to the metal, which doesn’t offer investors any similar guaranteed payout.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, dipped 0.05% to 94.20.
Dollar weakness usually benefits gold, as it boosts the metal’s appeal as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies.
Investors were looking ahead to U.S. data on jobless claims and inflation later in the trading day for further indications on the strength of the economy.
Elsewhere on the Comex, copper for May delivery inched up 1.3 cents, or 0.47%, to trade at $2.656 a pound.
Data released on Wednesday showed that the preliminary reading of China’s HSBC manufacturing index rose to 50.1 in February, just above the 50.0-point level that separates growth from a contraction on a monthly basis.
The Asian nation is the world’s largest copper consumer, accounting for almost 40% of world consumption last year.

Sources: investing.com, reuters.com