London: Gold rose on Tuesday, aided by a softer dollar and lower European stocks, after falling more than 2 per cent in the prior session in its deepest 1-day slide in over a year.
Spot gold was up 0.7 per cent at $1,201.00 an ounce by 1113 GMT as other markets, already nervous about this week’s US. Federal Reserve meeting, were rattled by the failure of Russia’s emergency interest rate rise to stabilise its currency.
Gold lost 2.5 per cent on Monday, its sharpest fall in a day since Dec. 2, 2013, giving up all of last week’s gains as oil prices tumbled to fresh 5-1/2-year lows, cutting gold’s draw as a hedge against oil-fuelled inflation.
Showing an unusual divergence from movements in spot prices, US gold futures for delivery in February slipped 0.7 per cent to $1,201.40 an ounce, stretching losses to a fifth session.
The dollar was down 0.5 per cent versus a basket of currencies, while European shares fell.
Investors are now waiting to see if the Fed’s final meeting of 2014 on Tuesday and Wednesday results in a more hawkish tone, with a statement and forecasts expected on Wednesday at 1900 GMT, followed by Fed chief Janet Yellen’s press conference.
The US economy has strengthened and jobs have been created at a faster-than-expected clip since the Fed’s last meeting in October, when it reiterated that benchmark rates were unlikely to rise for a “considerable time”.
Officials will have to decide whether to replace that phrase despite below-target US inflation and economic weakness in Europe and Asia.
“Until the Fed starts to see inflation at 2 per cent and above, I think there is very low risk of them actually raising rates,” online dealer BullionVault.com head of research Adrian Ash said.
“The interest rates story is perhaps going to be a bit of a red herring for investors and particularly for gold,” he added.
“If the market is already priced in for a rise in first half of 2015, we should expect disappointment.” Among other precious metals, silver rose 0.5 per cent to $16.18 an ounce, after sliding 5 per cent on Monday. US silver dropped almost 3 per cent, tracking the previous session’s losses in the spot market.
