Investing.com – Gold prices shrugged off expectations that the Federal Reserve will hike interest rates later this week as a sharp fall in the dollar boosted demand for the precious metal.
Gold futures for April delivery on the Comex division of the New York Mercantile Exchange rose by $5.70, or 0.43%, to $1,317.80 a troy ounce.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, fell 0.46% to 89.38.
Dollar-denominated assets such as gold are sensitive to moves in the dollar – A fall in the dollar makes gold cheaper for holders of foreign currency and thus, increases demand for the precious metal.
The fall in the greenback supported a small recovery in gold prices following last week’s selloff which came on the back of expectations that the Federal Reserve would not only raise rates this week but signal a faster pace of monetary policy tightening.
TD Securities said it expects Fed officials to sound more upbeat at the March FOMC meeting with the “balance of risks now skewed to the upside.”
Some suggested, however, the central could adopt a cautious approach on monetary policy as recent economic data has been mixed, weakening the Fed’s case to adopt a hawkish path of monetary policy.
“While the market appears convinced of three rate hikes over the course of the year, policymakers may indicate less firm expectations for policy,” Stifel said.
“The Federal Reserve is likely to reiterate a data-dependent stance and an expectation for ‘gradual’ movements in the removal of accommodation amid still lingering skepticism among some policymakers as to the direction of the underlying economy and inflation.”
According to Investing.com’s Fed rate monitor, 93% of traders expect the Federal Reserve to hike rates by 0.25% to a range of 1.50% to 1.75%.
In other precious metal trade, silver futures rose 0.29% to $16.32 a troy ounce, while platinum futures gained 0.36% to $954.30 an ounce.
Copper fell 1.06% to $3.08, while natural gas was fell 1.67% to $2.651.