Investing.com - Gold futures extended gains from the prior session in European trade on Wednesday, rising to a one-week high as investors scaled back expectations for how soon and how far U.S. interest rates might rise this year.
The shift came after Federal Reserve Chair Janet Yellen emphasized global dangers to growth and inflation, and thus the need to proceed "cautiously" on tightening policy.
Gold for June delivery on the Comex division of the New York Mercantile Exchange tacked on $2.60, or 0.21%, to trade at $1,240.10 a troy ounce by 06:58GMT, or 2:58AM ET.
A day earlier, gold rallied to $1,245.20, the most since March 23, after Fed Chair Janet Yellen said on Tuesday the U.S. central bank should proceed only cautiously as it looks to raise interest rates.
The dovish comments were in direct contrast to recent hawkish remarks by other FOMC members, who suggested another move on interest rate may be just around the corner.
Investors and economists dialed back their rate hike expectations in wake of Yellen’s dovish outlook, with traders of interest-rate futures now seeing no rate rise before November. A gradual path to higher rates is seen as less of a threat to gold prices than a swift series of increases.
The prospect of less U.S. interest rate rises this year drove the dollar down against its major rivals. The dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, slumped to an eight-day low of 95.00 in early trade. It last stood at 95.05.
A weaker dollar makes U.S. commodities less expensive for buyers holding other currencies.
Prices of the yellow metal are up nearly 15% so far this year as investors seek safe havens in the face of mounting instability in other financial markets and as fears over a China-led global economic slowdown make it tougher for the Fed to raise rates.
Market players are looking ahead to key U.S. data later in the day to gauge if the world's largest economy is strong enough to withstand further rate hikes this year. The U.S. was to release the ADP employment report for March at 13:15GMT, or 8:15AM ET, amid expectations for a gain of 194,000 jobs.
Traders will also be paying attention to a speech by Chicago Fed President Charles Evans later in the day to further judge the balance of opinion among policymakers on the prospect of further rate hikes.
Also on the Comex, silver futures for May delivery climbed 12.2 cents, or 0.8%, to trade at $15.35 a troy ounce during morning hours in London, while copper futures shed 2.7 cents, or 1.22%, to $2.187 a pound. Prices of the red metal dropped to a more than one-week low of $2.182 earlier amid simmering concerns over global economic growth.