Investing.com - Gold futures surged to a three-week high in North American trade on Wednesday, extending overnight gains as the U.S. dollar sank amid fading expectations of a Federal Reserve rate hike in the next couple of months.
Market players are pricing in just a 2% chance for a rate hike later this month and 23% for July, according to CME Group's (NASDAQ:CME) FedWatch tool. September odds were at about 46%.
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.
Fed 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.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, fell to 93.52 early Wednesday, the lowest since May 6. It last stood at 93.55, down 0.3% for the day.
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.
Gold for August delivery on the Comex division of the New York Mercantile Exchange rallied to an intraday high of $1,259.10 a troy ounce, the most since May 18. It last traded at $1,259.15 by 12:33GMT, or 8:33AM ET, up $12.15, or 0.97%.
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 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 jumped 53.6 cents, or 3.27%, to trade at $16.93 a troy ounce during morning hours in New York, while copper futures inched up 2.0 cents, or 0.98%, to $2.071 a pound.
Monthly trade data released earlier showed that both Chinese exports and imports fell in May, adding to concerns over the health of the world’s second largest economy.
Exports slumped 4.1% from a year earlier, worse than forecasts for a decline of 3.6%, while imports dropped 0.4%, compared to expectations for a fall of 6.0%. That left China with a surplus of $50.0 billion last month, the General Administration of Customs said.
Despite the weak exports, the Chinese central bank said on Wednesday it still expects the economy to grow by 6.8% this year.
China is the world’s largest copper consumer, accounting for nearly 45% of world consumption.