The return of investors to equities and the strengthening of the dollar against the yen took a hit on gold prices in Wednesday premarket trading. But signs that OPEC countries could curb crude oil production triggered widespread interest in energy stocks. In the S&P 500, energy was the best performing sector in Tuesday trading.
Spot gold pulled back 0.3% to $1,252.21 per ounce on Wednesday. The precious metal rose to a three-week high of $1,262.60 per ounce in Tuesday trading, offering hope that it could ascend to $1,300 if uncertainty persists in the stock and currency markets.
What’s affecting gold?
Gold appears to be tracking the movement of the dollar-yen pair. Investors are accumulating more of the yellow metal when the dollar weakens, because gold becomes more expensive for foreign buyers when the dollar is stronger.
Uncertainty over the U.S. interest rates outlook recently has driven interest in gold, with bullion registering its best quarterly performance in 30 years in the quarter ending March. It initially appeared that the Fed would perform four rate hikes in 2016 and started in that direction in December. But recent comments by Fed officials have doused investor hope of accelerated rate hikes this year.
If uncertainty persists in the Fed’s monetary policy direction and the oil producers meeting in Doha on Sunday fails to reach a favorable deal, interest in gold and other safe haven assets could surge. Already, Saudi Arabia ministers have hinted that his country won’t be cutting its oil output.
Central banks have been noted to be among gold buyers, with the regulators increasing their uptake of gold since the 2008 recession.
Silver followed gold’s trend as did platinum, falling below $1,000 an ounce. Both silver and platinum recently hit new highs as did gold.