Gold surged to its highest level in seven weeks on Tuesday as disappointing economic data raised investors’ doubt on a rapid rate hike pace.
Investors also concerned about the coming UK national election and a European Central bank meeting this week, sending the dollar to its lowest level in seven months.
Spot Gold rose 1.03 percent to $1,293.03 per ounce at 12:58 p.m. EDT on Tuesday, while gold future for August delivery was up 0.97 percent to $1,295.10 per ounce. The yellow metal has rebounded from its low at $1,213.81 an ounce last month after political uncertainty caused doubts about presidential administration’s ability to implement the fiscal stimulus. Gold has gained 12.77 percent this year.
In addition, the weaker-than-expected U.S. employment and wages growth raised concerns about the U.S economy. Investors increasingly doubt that the Federal Reserve will keep its aggrieve rate hike schedule. The Fed will hold meeting next week to decide the monetary policy. Investors are expecting two more rate hikes this year. Gold is highly sensitive to the changes in U.S. interest rates as a higher rate will increase the opportunity cost of holding non-yielding bullion.
"Light positioning and numerous upcoming geopolitical events should continue to underpin demand for the metal," said MKS PAMP trader Sam Laughlin in a note. "Targets extend to the 2017 high
around $1,295 and the psychological level of $1,300 above this."
Investors also are closely watching the European Central banking meeting on Thursday.