Mubasher: Gold prices exceeded a two-week high on Wednesday, after returning to the $1,300 per ounce level in the prior session, as investor appetite grew for the safe-haven metal, after UK parliament rejected an amended Brexit deal, as a weaker dollar gave more support.
By 9:10 am GMT, spot gold rose 0.49% to $1,307.90 per ounce, having hit $1,305.69 per ounce, its highest since 1 March, while US gold futures climbed 0.71% to $1,307.30 per ounce.
The House of Commons rebuffed Prime Minister Theresa May’s Brexit deal for the second time, exacerbating a political crisis just days before the UK’s departure scheduled for 29 March.
The UK parliament will vote later in the day on whether to support a no-deal Brexit. Should that fail, another vote will be held on Thursday to decide whether to extend the Brexit deadline.
“The ongoing Brexit [anxiety] has diminished risk appetite as investors are increasingly unnerved on the potential of a ‘hard Brexit’ deal,” Singapore-based Phillip Futures analyst Benjamin Lu told Thomson Reuters.
Asian equities drifted lower on Wednesday as risk-off sentiment loomed over markets after the Brexit vote.
Meanwhile, US consumer price inflation rose for the first time in four months last February, but the momentum of the gain was modest, resulting in the slightest annual increase in nearly two years and a half. This supported the Federal Reserve’s “patient” approach to rate hikes.
Higher rates reduce investor appetite for non-yielding bullion.
The US dollar fell 0.3% in the preceding session after the inflation data, making the precious metal cheaper for non-US currency holders.
By 9:10 am GMT, the US dollar index, which traces the greenback against a basket of six major peers, inched down 0.03% to 96.9070.
The negative US data, after a slew of soft reports from other economies, cascaded worries over a slowdown in global economy.
“Markets are going to be more interested in safe-haven assets in light of volatility from a slowing economy,” Lu said, voicing a positive stance on the yellow metal.