Gold gains on Tuesday
Gold prices rose on Tuesday, striving to recoup most of the losses from the previous session, as the dollar weakens as a result of monthly US inflation data as investors expect UK lawmakers to vote on the Brexit plan of the Prime Minister Theresa May.
Gold for April delivery GCJ9, +0.60% rose $6.30, or 0.5%, to $1,297.40 an ounce after losing 0.6% Monday. May SIK9, +1.02% was 12.6 cents, or 0.8%, higher at $15.40 an ounce.
Prime Minister May won last minute concessions from the European Union for the Brexit divorce deal on Monday in a bid to win support for his plan in a parliamentary vote later on Tuesday. May still faces a tough battle to win approval for the deal.
The British pound GBPUSD, -0.5932% has seen volatile trade ahead of the vote, while the ICE U.S. Dollar Index DXY, -0.22% a measure of the U.S. currency against six major competitors, was down 0.2%.
The dollar dropped soon after the data revealed that the US consumer price index grew 0.2% in February, matching market expectations, while the cost of living over the the past year was again slowing down to 1.5% from 1.6%.
A core reading of inflation, stripping out volatile food and energy prices, edged higher with 0.1%, the smallest increase since August. The annual growth in the so-called core rate also slowed a tick to 2.1%. Gold tends to be seen as a hedge against inflation, with readings of muted inflation providing little ammunition for gold bugs.
But given the data, “the Fed would appear to be justified in supporting the real economy by being patient and leaving interest rates on hold for a potentially extended period,” Paul Ashworth, chief U.S. economist at Capital Economics, wrote in note.
This softer tone to the dollar helped buoy gold, analysts say. A cheaper buck may be positive for commodities priced in the greenback, making them cheaper for users of other currencies.
The consequences of the Brexit vote can set the tone for gold. The May victory may raise the overall appetite for risky assets that are likely put renewed pressure on gold, Eugen Weinberg, head of commodity research at Commerzbank, said in a note.
In other metals trade, April platinum PLJ9, +2.13% was up $16.50, or 2%, to $833.30 an ounce, while June palladium PAM9, +1.01% was up $18.70, or 1.3%, to $1,500.70 an ounce. High-grade copper for May HGK9, +0.97% added 4.3 cents to $2.944 a pound, up 1.5%.
Among exchange-traded funds, the SPDR Gold Shares GLD, +0.39% edged up by 0.4% and the VanEck Vectors Gold Miners GDX, +1.22% added 1.2%.