Gold vaulting the $1,200 per ounce mark on Tuesday, as investors sought refuge in the metal after stock markets sold off due to anti-euro comments by an Italian lawmaker.
Spot gold rose 1.6 percent to $1,206.11 per ounce at 1404 GMT, its highest since Sept. 21. U.S. gold futures were up 1.5 percent to $1,209.20.
Stocks fell worldwide, while European assets also dropped after the economics spokesman for Italy’s ruling League party, Claudio Borghi, said most of the country’s problems could be solved by having its own currency.
But while the market was experiencing respite from extensive losses, analysts were cautious about Tuesday’s rally.
“The equity market sell-off has unnerved investors and is bringing in some safe-haven bids,” said FOREX.com analyst Fawad Razaqzada.
“But, the bounce is insignificant and is solely on the stocks’ sell-off and it will only get interesting if we go above $1,205. For the time being, I would be cautious,” he said.
Gold has fallen for the past six months, losing 13 percent, largely due to dollar strength, with the U.S. currency benefiting from a vibrant U.S. economy, rising U.S. interest rates and fears of a global trade war.
Market participants are also on the lookout for additional clues about the pace of interest rate hikes from U.S. Federal Reserve Chairman Jerome Powell, who was due to speak on “The Outlook for Employment and Inflation” before the National Association for Business Economics later on Tuesday.
The Fed raised rates last week and said it planned four more increases by the end of 2019 and another in 2020, citing steady economic growth and a robust jobs market.
Rising interest rates boost the greenback by increasing the opportunity cost of holding gold.
“As long as the U.S. economy continues to grow strongly and the news in terms of trade is generally in the favour of U.S., gold is going to struggle,” Mitsubishi analyst Jonathan Butler said.
In other precious metals, silver rose 3 percent to $14.89 per ounce, its highest since Aug. 28.
Palladium was up 0.8 percent to $1,064.80 per ounce, while platinum rose 1.5 percent to $833.80 per ounce.
