Gold price climbs as dollar weakens ahead of U.S. inflation data

New York (Feb 13)  Gold rose for a second day on Tuesday as the dollar slipped in the face of a recovery in global equities, which dampened appetite for the U.S. currency as a safe store of value.

A retreat in the dollar, in which the precious metal is priced, has helped gold to pull back nearly 2 percent from last week's one-month low of $1,306.81 an ounce.

Spot gold  was up 0.4 percent at $1,328.44 by 1245 GMT, while U.S. gold futures for April delivery were $4.30 an ounce higher at $1,330.70. While bullion is sometimes seen as a haven from risk, it benefited little last week from the slide in equities as investors moving out of stocks broadly sought refuge in the dollar, trumping other drivers.           

"Gold is moving up when risk appetite is improving, and that's happening because the dollar is weakening - otherwise that should not happen," said ABN Amro analyst Georgette Boele.

Global equities were up 0.3 percent on Tuesday, with Asian shares rising from two-year lows overnight on the back of an extended rebound among Wall Street stocks after their biggest weekly drop in two years.            

Shares remained under some pressure in Europe, however,
indicating caution in the market. Investors are now awaiting
U.S. January inflation data, due on Wednesday, for clues on the
next move in financial markets.
    Inflation is sometimes seen as gold-positive, because
bullion is seen as a safe store of value at a time when price
pressures are rising, but expectations that the U.S. Federal
Reserve will lift interest rates to fight inflation make the
non-yielding metal less attractive.
    "Usually, if these readings are a bit higher than expected,
that triggers some expectations for higher rates, which should
support the dollar but will weigh on gold if you get yields
moving up," ABN Amro's Boele said.
    Among other precious metals, silver was up 0.5
percent at $16.63 an ounce, while platinum gained 0.6
percent to $976.50.
    Palladium was up 0.8 percent at $992.70. The
autocatalyst metal has slid nearly 14 percent since hitting a
record $1,138 in mid-January but remains at elevated levels on
expectations that the market will remain in deficit for a while
yet.
    "Over time, prices will provide the incentive to right
palladium's balance, driving substitution in autocatalysts and
industrial uses, as well as supporting the expansion of both
recycling and new production capacity," ICBC Standard Bank said
in a note.
    "But these are multi-year processes and, in the meantime,
prices will need to incentivise the release of sufficient
inventory to plug an ongoing deficit."

Reuters