Gold advanced to trade near a 13-month high on Tuesday, supported by a struggling dollar and hopes the U.S. Federal Reserve will not raise interest rates as soon as next week’s meeting.
The non-interest yielding metal could test $1,300 an ounce, more than 2 percent higher than its current level, if the Fed stands pat at the March 15-16 policy meeting, said Daniel Ang, analyst at Phillip Futures in Singapore.
“A lot of traders are trying to anticipate a ‘no rate hike’ scenario, causing a bit of an increase in gold,” said Ang. He added that a shaky global economy and the recent strength in the U.S. dollar, which had curbed U.S. exports, could convince the Fed to hold rates steady.
Spot gold was up 0.3 percent at $1,270.76 an ounce by 0200 GMT, not far from Friday’s peak of $1,279.60, its highest since Feb. 3, 2015.
U.S. gold for April delivery gained 0.6 percent to $1,270.90 an ounce.
The dollar has been struggling to find traction despite a robust U.S. February employment report on Friday, its losses extending this week as a rally in oil prices rekindled demand for the euro and commodity-sensitive currencies.
That has benefitted gold along with fairly low market expectations that the Fed will raise interest rates again next week after lifting them for the first time in nearly a decade in December.
Ahead of the meeting, Fed Governor Lael Brainard, who has emerged as a leader of the Fed’s dovish faction, argued for “patience” in raising interest rates. But Fed Vice Chair Stanley Fischer warned that inflation is showing signs of accelerating, words that policymakers often use when signaling a preference for raising rates.
Supporting bullion, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, dropped slightly on Friday, but stayed near the highest since September 2014 at 25.5 million ounces.
But INTL FCStone analyst Edward Meir said “gold will likely struggle over the short-term given that the twin rallies in oil and equities seem to be sticking”.
Asian shares inched higher after global oil prices soared to three-month highs on growing hopes of more coordinated measures from oil-producing countries to stem tumbling prices.
Spot silver rose 0.3 percent to $15.697 an ounce. Spot platinum and palladium were steady at $1,000.76 and $574.06 respectively, both near multi-month highs reached on Monday.