Gold rallied to the highest level in nearly three weeks on Tuesday after a strong debate performance from French centrist presidential candidate Emmanuel Macron and as fading expectations for near-term US interest rate hikes pushed the dollar lower. The US dollar index fell to a six-week low while 10-year Treasury yields and US and European shares also dropped, helping to bolster gold.
Spot gold was up 0.9 percent at $1,244.48 an ounce by 2:50 pm EDT (1850 GMT), just off the session high of $1,247.60, its highest level since March 2. US gold futures for April delivery settled up 1 percent at $1,246.50. "We're back down below 100 on the dollar index, and that is tied in with the less aggressive rate hike expectations that we heard last week from the Fed," Mitsubishi analyst Jonathan Butler said.
The Fed's policy statement last Wednesday was less hawkish than expected, dampening speculation that the US central bank would raise interest rates quickly this year. Gold is highly sensitive to rising US rates, because they increase the opportunity cost of holding non-yielding bullion while boosting the dollar, in which it is priced. Gold fell in the run-up to the Fed's rate hike last week, with hedge funds and money managers sharply cut their net long position in COMEX gold futures.
Gold prices were also underpinned by uncertainty over President Donald Trump's policy direction. "The previous two hikes marked cycle lows for gold, and European election uncertainty, US President Trump's foreign policies, as well as seasonal demand in India materialising in April are likely to make Q2 the strongest quarter for gold prices this year," Standard Chartered said in a note. Silver was up 0.7 percent at $17.53 an ounce, while platinum was 0.1 percent lower at $966.24. Palladium was up 0.6 percent at $784, after rising to its highest level in more than a month at $792.90 an ounce.