Gold benefits from weaker dollar and dovish Fed

The dollar’s weakness in recent days continues to ripple through foreign exchange markets. The yen strengthened by about 1 per cent in the wake of Fed Chair Janet Yellen’s cautious commentary, including a 0.1 per cent advance on Thursday to 112.36 yen per dollar.

The recent dovish tone from the Fed are likely to weigh on the dollar. Yellen spoke on Tuesday and said that the Fed needed to “proceed cautiously” in lifting interest rates.

The dollar index, a measure of the US currency versus a basket of global peers, was sitting 0.1 per cent higher at 94.896 on Thursday. However, its decline over the previous three sessions has dragged it back toward five-month lows hit just after the Fed’s policy meeting on March 16, when it kept rates on hold.

Gold is poised for its best quarterly performance since the September quarter of 1990. Sitting 0.3 per cent higher at $1,228.36 on Thursday, the yellow metal has gained 15.7 per cent in the past three months as the central banks of Japan and Europe further loosened monetary policy and the Fed has scaled back its rate rise expectations.

Brent crude, the international oil benchmark, was down 0.6 per cent today at $39.01 a barrel, while West Texas Intermediate, the US marker, was down 0.8 per cent at $38.01. Having hit 12-year lows in January, the benchmarks are now up by 4.6 per cent and 2.6 per cent, respectively, this quarter.

The Fed’s cautious tone helped global stock markets, especially emerging markets in Asia.

On Wednesday, the S&P 500 advanced for a third day in a row, up 0.4 per cent to its highest close of 2016. The Nasdaq Composite climbed 0.5 per cent.

On the Chinese mainland the Shanghai Composite gained 0.3 per cent and the Shenzhen Composite was 0.7 per cent higher. Australia’s S&P/ASX 200 was up 1.3 per cent. Hong Kong’s Hang Seng was down 0.3 per cent though.

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