Investing.com – Gold prices rose sharply on dollar weakness and investor expectations for uptick in gold demand ahead of the Chinese New Year.
Gold futures for February delivery on the Comex division of the New York Mercantile Exchange rose by $11.00, or 0.84%, to $1,326.70 a troy ounce.
The dollar struggled to add to gains following its biggest weekly gain in nearly a year, prompting a sharp rise in gold prices ahead of the start of the Chinese New Year which usually ushers in gift buying in the form of gold jewellery, underpinning demand for the precious metal.
Dollar-denominated assets such as gold are sensitive to moves in the dollar – A fall in the dollar makes gold cheaper for holders of foreign currency and thus, increases demand for the precious metal.
The biggest demand for gold is for use in gold jewellery which accounts for roughly 50% of total demand, according to the World Gold Council.
“Based on the local premiums to international gold prices, it appears that demand ahead of the Chinese New Year has been relatively strong,” Capital Economics analyst Simona Gambarini said in an email to clients.
The rebound in gold prices comes in the wake of a second straight week of losses, however, market participants expect upward momentum to be short lived somewhat as strong US consumer inflation data due Wednesday could stoke expectations for a faster pace of Federal Reserve rate increases.
Credit Suisse said Monday it sees the Fed raising interest rates four times in 2018 following the federal budget pact agreed last week.
In other precious metal trade, silver futures rose 2.52% to $16.45 a troy ounce, while platinum futures gained 1.19% to $972.90.
Copper rose 1.57% to $3.08, while natural gas fell 0.50% to $2.57.