Gold climbs on weakening dollar

london — Gold rose for a second day on Tuesday as the dollar slipped in the face of a rebound in Asian equity markets, which dampened appetite for the US currency as a safe store of value.

A retreat in the dollar, in which the precious metal is priced, has helped gold to pull back nearly 2 per cent from last week’s one-month low of $1,306.81 an ounce.

Spot gold was up 0.5 per cent at $1,329.71 by 1030GMT, while US gold futures for April delivery rose $5.50 to $1,331.90.

While bullion is sometimes seen as a haven from risk, it benefited little last week from the slide in equities as investors moving out of stocks broadly sought refuge in the dollar, trumping other drivers.

“Gold is moving up when risk appetite is improving, and that’s happening because the dollar is weakening — otherwise that should not happen,” said ABN Amro analyst Georgette Boele.

Equity markets rose from twoyear lows in Asia on Tuesday, lifted by an extended rebound among Wall Street stocks after their biggest weekly drop in two years.

Shares remained under some pressure in Europe, however, indicating caution in the market. Investors are now awaiting US January inflation data, due on Wednesday, for clues on the next move in financial markets.

Inflation is sometimes seen as gold-positive, because bullion is seen as a safe store of value at a time when price pressures are rising, but expectations that the US Federal Reserve will lift interest rates to fight inflation make the non-yielding metal less attractive.

“Usually, if these readings are a bit higher than expected, that triggers some expectations for higher rates, which should support the dollar but will weigh on gold if you get yields moving up,” ABN Amro’s Boele said. — Reuters