Investing.com -- Gold surged as much as $20 an ounce on Thursday, ahead of a public appearance by Federal Reserve chair Janet Yellen after the close of trading, as investors digested dovish indications from the Fed's March minutes that the U.S. central bank will remain cautious with the timing of its next interest rate hike.
On the Comex division of the New York Mercantile Exchange, gold for June delivery traded between $1,224.20 and $1,245.00 an ounce before settling at $1,238.90, up 15.00 or 1.23% on the day. With the sharp gains, gold bounced from near 5-week lows by posting one of its strongest rallies over the last two weeks. After hitting 13-month highs at $1,280 an ounce last month, the precious metal has fallen back considerably since the Federal Open Market Committee (FOMC) last met in mid-March. Gold is coming off its strongest quarter in three decades, when it surged nearly 15% as investors piled into the safe-haven asset due primarily to mounting concerns of a China-driven global economic slowdown.
Gold likely gained support at $1,063.20, the low from January 4 and was met with resistance at $1,280.70, the high from Mar. 11.
The minutes of the FOMC's March meeting, released on Wednesday, depicted a divided Committee, split on whether it should raise the target range of its benchmark Federal Funds Rate when it meets again at the end of the month. At its previous meeting, the FOMC voted 9-1 to leave the Fed Funds Rate unchanged at a level between 0.25 and 0.50%. One member, Kansas City Fed president Esther George, dissented at the meeting, while favoring a slight rate increase of 25 basis points.
Several other members considered raising rates in March, the minutes showed. Citing evidence that the economy was expanding at a moderate pace, improved labor market conditions and continued firming of inflation, the members discussed the possibility of raising the Fed Funds Rate even further. The majority of the members, however, agreed that there could be little room to ease policy through conventional means if the economy or inflation suffered an unexpected shock. In addition, the members emphasized that heightened global risks and the "asymmetric ability" of monetary policy to respond to the shocks were strong enough factors to prompt the committee to express caution with the timing of future rate hikes. Notably, the FOMC included 10 references to "gradual" accommodation when it came to monetary policy in the minutes.
Any rate hikes by the Fed this year are viewed as bearish for gold which struggles to compete with high yield bearing assets in rising rate environments.
A wave of FOMC policymakers are scheduled to speak at the end of this week, including Yellen who will appear at a panel with former Fed chairmen Ben Bernanke, Alan Greenspan and Paul Volcker on Thursday evening in New York.
Elsewhere, the U.S. Department of Labor said Thursday that initial jobless claims fell by 9,000 to 267,000 last week, slightly below consensus forecasts of 272,000. The four-week average, meanwhile, ticked up by approximately 3,000 to 266,750. Last month, the U.S. unemployment rose moderately by 0.1 to 5.0%.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, reached an intraday high of 94.67 on Thursday, before falling back to 94.50 (up 0.01%) in U.S. afternoon trading. The index remains near five-month lows.
Dollar-denominated commodities such as gold become more expensive for foreign purchasers when the dollar appreciates.
Silver for May delivery gained 0.206 or 1.37% to $15.260 an ounce.
Copper for May delivery plummeted 0.067 or 3.10% to $2.077 a pound.