Gold held on to sharp overnight gains on Wednesday, buoyed by a softer dollar and Federal Reserve chair Janet Yellen’s remarks that the US central bank should be cautious in raising interest rates.
Spot gold was little changed at $1,241.94 an ounce by 0025 GMT, after gaining 1.7 percent on Tuesday.
Yellen said on Tuesday that the Fed should proceed only cautiously as it looks to raise interest rates, pushing back on a handful of her colleagues who have suggested another move may be just around the corner.
In her first comments since the Fed decided to hold rates steady two weeks ago, Yellen said inflation has not yet proven durable against the backdrop of looming global risks to the U.S economy, including still-low oil prices and concerns over China.
The US dollar dropped sharply and stocks on Wall Street ended at 2016 highs after Yellen’s remarks.
Gold is highly sensitive to US monetary policy, as rising interest rates lift the opportunity cost of holding non-yielding bullion, while boosting the dollar. The metal slid 3 percent last week after hawkish comments from a series of Fed officials.
Dallas Federal Reserve President Robert Kaplan also echoed Yellen on Tuesday, saying the central bank should proceed gradually and cautiously in raising rates.
San Francisco Fed President John Williams, a close ally of Yellen who is usually among the core of decision-makers, said on Tuesday that the US central bank should stay on track with its tightening plan.
US federal funds futures rose on Tuesday, implying traders now think the Fed will not raise interest rates until late 2016.
Assets in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.40 percent to 820.47 tonnes on Tuesday – the first drop in two weeks.
Holdings are still near their highest in over two years as wider turmoil in the stock markets has burnished gold’s safe-haven appeal.
China’s net gold imports via main conduit Hong Kong rose in February, from a 17-month low hit in the previous month, buoyed by restocking after Lunar New Year and strong investment demand.
For the top stories on metals and other news, click or DATA AHEAD (GMT) 0900 Euro zone Business climate Mar 1200 Germany Consumer prices Mar 1215 US ADP national employment Mar 1700 Federal Reserve Bank of Chicago President Charles Evans speaks on current economic conditions and monetary policy PRICES AT 0025 GMT Metal Last Change Pct chg Spot gold 1241.94 0.14 0.01 Spot silver 15.385 0.041 0.27 Spot platinum 965.5 -1.67 -0.17 Spot palladium 576 2.5 0.44 Comex gold 1242.6 6.8 0.55 Comex silver 15.39 0.157 1.03 COMEX gold and silver contracts show the most active months