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Gold rises on U.S. Fed pause expectation, equity pullback

Reuters  |  BENGALURU 

By N R

BENGALURU (Reuters) - Gold prices rose on Monday as the dollar fell on expectations that the will not raise rates this year and as Asian stocks tumbled after lacklustre China data pointed to a slowdown in the world's second-largest economy.

Gold tends to gain on expectations of lower interest rates, as they reduce the opportunity cost of holding a non-yielding bullion and trim the demand for U.S. dollar, making the yellow less expensive for holders in other currencies.

Spot gold was up 0.3 percent at $1,291.68 per ounce, as of 0735 GMT, while U.S. gold futures were up 0.2 percent at $1,292 per ounce.

The weakness in equities and U.S. dollar appear to be providing support for gold, said Michael McCarthy, chief strategist, and Stockbroking.

"The market feels there is a shift in the Fed's stance and it is more accommodative and we are seeing the dollar weakening for several sessions."

had the ability to be patient on monetary policy given stable price measures, said last week, and he downplayed predictions from policymakers suggesting interest rates would be raised twice more this year.

"The (gold) market is cautious ahead of data flows that might revise the recent very dovish outlook," said Nicholas Frappell, at Bullion, adding that the was facing a resistance around $1,300 level.

Meanwhile, Asian shares tumbled on Monday after a shock contraction in Chinese December exports, which fell 4.4 percent from a year earlier, the biggest monthly drop in two years.

Spot gold has gained over 11 percent since hitting a 1-1/2-year low in mid-August at $1,159.96 due to volatile stock markets and a weaker dollar.

"The geopolitical risks have also started to induce some safe-haven buying. Investors are becoming increasingly worried about the Brexit negotiations. At the same time, there appears no end in sight for the shutdown," said in a note.

UK must win a vote in parliament on Tuesday to get her Brexit deal approved, while a partial shutdown over Donald Trump's demand to build a wall along the U.S.-border entered its 24th day on Monday, with no end in sight.

Spot gold remains neutral in a range of $1,279-$1,299 per ounce, and an escape could suggest a direction, according to

Among other precious metals, palladium fell 0.6 percent to $1,309.70 an ounce. It hit a record high at $1,342.43 last week.

fell 1.8 percent to $795.75, while silver dropped 0.2 percent to $15.57 an ounce.

(Reporting by Nallur in Bengaluru, Editing by and Subhranshu Sahu)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Mon, January 14 2019. 13:21 IST