The spot gold price rose during Asian trading hours on Thursday boosted by surging crude oil prices and a weaker US dollar.
Spot gold was last at $1,231.20-1,231.60 per ounce, up $8.60 from Wednesday’s close. Trading ranged at $1,222.20-1,234.20 so far.
The rebound for spot gold comes after the yellow metal fell to a seven-week low of $1,217.90 on Wednesday.
The Brent crude oil spot price touched $50.10 per barrel on Thursday morning – the highest since 4 November 2015.
This follows overnight data from the Energy Information Administration which showed US crude oil inventories falling 4.2 million barrels last week, a much larger decline than the forecasted 1.7 million-barrel drop. The Brent crude spot price was last at $50.05, up 0.58 percent from Wednesday’s close.
The Texas light sweet crude also rose to a fresh 7.5-month high of $49.86 on Thursday morning. It was recently 0.5 percent higher at $49.85.
In contrast, the US dollar index has softened, falling 0.27 percent to 95.15 so far on Thursday morning.
The dollar index remains pivotal and continues to act as the bellwether to metals’ prices, Andy Farida, FastMarkets’ analyst, said.
“Considering the speed of the rebound in the dollar index and in comparison with the recent weakness in gold, the yellow metal is holding up rather well for now,” he said.
The selling in the US dollar had started in December – it bottomed out on May 2 at 91.91 but has since retraced 38 percent higher.
Heading into June, the focus will largely be on the movement of the US dollar to be followed by the Federal Reserve’s rate decision, said Edward Meir of INTL FCStone.
“Should the federal fund probabilities move higher and towards the 50-percent mark, the dollar could start to weaken, as at that point, the rate increase would be pretty much factored in. Between now and then, however, this ‘discounting process’ will likely continue to play out,” he said.
“In fact, it could fill out some more on Friday when Janet Yellen talks and it will be interesting to see whether she nudges expectations towards a rate increase somewhat further.”
Fed chair Janet Yellen is scheduled to appear at Harvard on Friday, along with former chairman Ben Bernanke – investors will scrutinise her speech for any references to US monetary policy.
Market participants have raised the odds of a June/July US rate hike after Federal Open Market Committee (FOMC) April meeting minutes released last week read more hawkish than expected. A majority of policy-board members are growing more comfortable with a summer interest rate hike after the global equity calamity at the beginning of the year subsided.
Market participants currently see a 32-percent chance of a June rise, with 58 percent expecting it in July, according to CME Group FedWatch.
In US data released Wednesday, the US goods trade balance for April at -$57.5 billion was better than the forecast of -$60.1 billion. HPI for March ticked up 0.7 percent, above the economic consensus of 0.4 percent.
Flash services PMI for April came in at 51.2, missing the projected 53.1 estimate and below the previous figure of 52.8.
US data due later on Thursday includes core durable goods orders, unemployment claims, durable goods orders and pending home sales.
In equities, the Shanghai Composite fell 1.02 percent to 2,786.24 recently on Thursday.
In other precious metals, silver rose $0.16 to $16.41/$16.43. Platinum jumped $14 to $1,000/1,005, and palladium gained $12 to $539/544 recently on Thursday.
On the Shanghai Futures Exchange, gold for December delivery was unchanged at 261.45 yuan per gram and December silver was flat at 3,667 yuan per kilogram.
(Additional reporting by Dalton Barker)
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