LONDON — Gold rose on Wednesday ahead of minutes of the Federal Reserve’s latest meeting, snapping three days of losses, as expectations that US interest rates will stay lower for longer sharpened appetite for the metal.
Gains were limited, however, as stock markets rallied, with rising equities on both sides of the Atlantic pointing to a retreat in the risk aversion that drove gold prices to one-year highs last week.
Spot gold was at $1,210.57 an ounce at 2.45pm GMT, up 0.9%, while US gold futures for April delivery were up 0.2% at $1,210.80.
Gold peaked at $1,260.60 an ounce last week and has rallied nearly 14% since the start of the year, driven largely by expectations that wider market volatility will lead the Federal Reserve to take a cautious attitude to further rate hikes.
"The Fed rate hike most likely won’t happen in March, and that for me is the most important driver behind the price of gold," Natixis analyst Bernard Dahdah said.
"Even if the wider markets improve slightly, as we’ve seen in the last few days, if people still believe the rate hike won’t take place in March it will be hard to see gold prices continuing a downward movement. That’s why it’s sticking at the levels we’ve seen today."
Speculation has increased in recent days that the US central bank might resort to negative interest rates to stimulate the economy after Fed Chair Janet Yellen said last week it was an option.
Ultra-low rates, which cut the opportunity cost of holding non-yielding gold, were a key factor driving prices to record highs in 2011.
"Having been long-standing bears (on gold), we have now turned bullish," ABN Amro said in a note.
"We no longer expect the Fed to raise interest rates again in 2016. We think it will only resume its rate hike cycle once economic growth strengthens and the economy has absorbed the past tightening of financial conditions."
John Paulson, one of the world’s most influential gold investors, slashed his bets on bullion at the end of last year by cutting his stake in SPDR Gold Trust, the world’s biggest gold exchange-traded fund, by 37%, a federal filing showed on Tuesday.
Silver was up 0.6% at $15.32 an ounce, while platinum was up 1.6% at $942 an ounce and palladium was up 1.2% at $510.15 an ounce.