Gold futures were seen trading higher on Wednesday, climbing towards a two-week high before the release of the US Federal Reserve minutes from the Fed’s March meeting which is scheduled for release later in the day and expected to give a hint on the central bank’s monetary policy.
Meanwhile the recent developments in Ukraine increased the metal’s safe-haven status and signs of high demand in China boosted the metal.
Gold futures climbed 0.22% higher to $1312.10 an ounce at the time of writing on the New York Comex, the highest since March 26.While silver futures traded flat, edging 0.01% higher to $20.055 an ounce at the same time.
Gold- Fed Minutes
Following the Federal Reserve’s March 18-19 meeting, Fed Chair Janet Yellen said the US central bank might increase the benchmark interest rate in the next six months before the end of the asset-purchasing program, which is expected to end later in the year.
The US central bank reduced its monthly bond-purchases by $10 billion for the third time, leaving the purchases at $55 billion.
The yellow metal dropped by 28% last year on worries that the world’s largest economy grew, which would signify the end of monetary stimulus.
Weak Dollar
“Through this past session, spot gold managed a 0.9% advance with a modest uptick in derivative volume (ETFs and futures) yet, the lack of momentum and turnover still calls into question the conviction,” John Kicklighter, chief strategist at FXCM wrote in a note.
“It further begs the question: what percentage of this performance was gold’s innate strength versus the dollar’s universal weakness. When we price the metal in Yen, Australian dollars, euro, pounds or other currencies; its performance was either negative or unchanged. While gold may be an anti-dollar commodity, there are plenty of other currencies that will attract the capital first,” Kicklighter added.
The US dollar index, which measures the strength of the US dollar against a basket of six major currencies, edged 0.06% higher at 79.8 points, below the 80-point level and the lowest since March 18.
Assets in the world’s largest gold-backed ETF, SPDR Holdings; dropped 2.7 tons to 806.48 tons Tuesday, the lowest since March 7.
Meanwhile, ongoing tension between Russia and Ukraine over the annexed Black Sea Crimea peninsula continues as NATO issued another warning against Russia that any further intervention in Ukraine would cause tougher consequences.
According to the International Monetary Fund (IMF), Russia’s growth this year is expected to be restrained due to the ongoing tensions with Ukraine and could cause further damage if sanctions against the country build up.
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