Gold rose on Tuesday to recover from its lowest level in nearly six weeks, supported by a softer dollar ahead of a speech later in the day by Federal Reserve Chair Janet Yellen for clues on whether the US will keep raising rates this year.
Fed officials have signalled they will look through a slowdown in inflation and continue on their current trajectory of interest rate hikes. But investors are sceptical and market pricing shows only a 40 per cent chance of a rate hike at the Fed's December meeting.
Yellen is scheduled to take part in a discussion on global economic issues at London's British Academy. Ahead of that, the dollar slipped 0.5 per cent against major currencies. She will likely reiterate the central bank's positive views about the US economy and the Fed's stance of raising interest rates once more this year, said OCBC analyst Barnabas Gan.
Spot gold had risen 0.6 per cent to $1,251.84 per ounce at 0844 GMT. It had dropped to $1,236.46 on Monday, its weakest since May 17. The precious metal slid 1 per cent in the previous session as a large sell order hit sentiment, though the losses were limited by political uncertainty around the world.
US gold futures for August delivery rose 0.5 percent to $1,252.20 an ounce.
“Around the time London came in there was some decent buying seen through COMEX. The market consequently sharply rose through $1,247 all the way to $1,252 in a matter of seconds, as stops were tripped,” MKS PAMP trader Alex Thorndike said in a note.
Geopolitical tensions
“We are still keeping an eye out on geopolitical tensions, gold thrives in uncertainty and increased uncertainty in the near term should actually push gold prices up,” said OCBC's Gan.
Allegations of ties to Russia have cast a shadow over US President Donald Trump's first five months in office, while the British government's looming Brexit talks are also fuelling concern about global stability.
Tensions also rose as the US Supreme Court had on Monday handed a victory to Trump by reviving parts of a travel ban on people from six Muslim-majority countries.
Spot gold may drop back towards $1,172 in three months, as suggested by its wave pattern and a Fibonacci retracement analysis, according to Reuters technical analyst Wang Tao.
Among other precious metals, silver rose 0.8 per cent to $16.68 an ounce. Palladium climbed 0.4 per cent to $868.25 per ounce. Platinum rose 1.1 per cent to $922.90 per ounce, recovering from Monday's six-week trough.