Investing.com - Gold futures extended strong overnight gains in European trade on Thursday to hit a fresh three-week high as a broadly weaker U.S. dollar due to fading expectations for a summer rate hike boosted the precious metal.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.1% at 93.54, not far the prior session’s five-week low of 93.41.
Dollar weakness usually benefits gold, as it boosts the metal's appeal as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies.
Investors all but ruled out a rate hike at the Fed’s June 14-15 meeting after U.S. employment data last week showed the economy added just 38,000 jobs last month, the smallest increase since September 2010.
Market players are pricing in just a 4% chance for a rate hike later this month and 27% for July, according to CME Group's (NASDAQ:CME) FedWatch tool. September odds were at about 44%.
Federal Reserve Chair Janet Yellen said earlier this week that the central bank plans to raise interest rate hikes, but gave no indication on the timing of the rate hikes.
Gold for August delivery on the Comex division of the New York Mercantile Exchange rallied to a daily peak of $1,269.00 a troy ounce, the most since May 18. It last traded at $1,264.50 by 06:44GMT, or 2:44AM ET, up $2.20, or 0.17%.
A day earlier, gold surged $15.30, or 1.23%, amid waning expectations that the Fed will raise interest rates anytime soon.
Prices of the precious metal are up nearly 4% so far in June, after sliding more than 6% a month earlier, as market players reacted to shifting views on the timing of the next U.S. rate hike.
Gold is up 19% so far this year amid skepticism over the Federal Reserve's ability to raise interest rates as much as it would like this year.
The yellow metal is sensitive to moves in U.S. interest rates. A gradual path to higher rates is seen as less of a threat to gold prices than a swift series of increases.
Elsewhere on the Comex, silver futures for July delivery tacked on 21.0 cents, or 1.24%, to trade at $17.19 a troy ounce during morning hours in London, while copper futures inched up 1.8 cents, or 0.9%, to $2.080 a pound.
Investors digested another round of Chinese economic data. The National Bureau of Statistics reported earlier that China’s consumer price index rose 2.0% in May from a year earlier, below forecasts for an increase of 2.3%. The producer price index fell 2.8% on a year-over-year basis, compared to a decline of 3.4% in April, the agency said.
The Asian nation is the world’s largest copper consumer, accounting for nearly 45% of world consumption.