CHICAGO-- Gold futures on the COMEX division of the New York Mercantile Exchange rose on Wednesday as a technical bounce and a weaker U.S. dollar supported the precious metal.
The most active gold contract for March delivery rose 7.7 U.S. dollars, or 0.63 percent, to settle at 1,233.10 dollars per ounce.
Analysts note that the precious metal hit a key technical support level of 1,218 U.S. dollars, which triggered a bounce in the price of gold, bringing it back up. Additionally, the U.S. Dollar Index fell by 0.05 percent to 101.18 as of 1805 GMT.
The index is a measure of the dollar against a basket of major currencies. Gold and the dollar typically move in opposite directions, which means if the dollar goes up, gold futures will fall as gold, measured by the dollar, becomes more expensive for investors.
Investors believe that this rally is likely to be short-lived as the U.S. Federal Reserve Chairwoman Janet Yellen hinted to Congress during testimony on Wednesday that she sees inflation increasing. Since the Fed is duty-bound to control inflation and promote employment, this could result in a rate hike sooner rather than later.
As of Wednesday, the odds for a rate hike have increased significantly. Investors believe the Fed may raise rates from 0.75 to 1.00 during the May FOMC meeting at the earliest. According to the CME Group's Fedwatch tool, the current implied probability of a hike from 0.50 to at least 0.75 is at 27 percent at the March meeting and 50 percent for the May meeting.
The precious metal was put under pressure as the U.S. Dow Jones Industrial Average rose by 85.55 points, or 0.42 percent as of 1805 GMT. Analysts note that when equities post losses, the precious metal usually goes up, as investors are looking for a safe haven, while the opposite is true when U.S. equities post gains.
Silver for March delivery rose 7.4 cents, or 0.41 percent, to close at 17.963 dollars per ounce. Platinum for April delivery added 7.7 dollars, or 0.77 percent, to close at 1,009.90 dollars per ounce.
Source: Philippines News Agency