Gold Higher After US CPI and Mixed Rate Hike Expectations

Gold rose to a 2-1/2 week high on Tuesday, heading for its fifth session of gains on a weaker dollar and growing expectations that a U.S. interest rate increase could be pushed to September.

Spot gold climbed to its highest level since March 6 at $1,195.30 an ounce before easing slightly to trade up 0.3 percent at $1,192.14 by 1252 GMT.

Prices were on course to post their longest winning streak since January last year, with investors favouring bullion over the past few days because of a slump in the dollar after the Federal Reserve’s cautious stance on the U.S. economy and diminishing likelihood of an early rate increase.

The metal, which does not pay any interest, had suffered from earlier speculation of higher U.S. rates as early as June.

The dollar was down 0.4 percent against a basket of currencies, mostly because of euro strength after encouraging purchasing manager surveys in Europe.

“In the short term the dollar’s drawback is favourable for a rally in gold; we seem to target $1,200 on the upside, which is a strong resistance level,” Mitsubishi Corp strategist Jonathan Butler said.

“But investors could still apply the strategy of selling the rally.”

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza