Gold futures closed higher in the domestic market on Tuesday as a continued oil collapse and mounting worries over a China slowdown curbed risk taking appetite and forced a flight to the safety of the yellow metal. Traders shunned equities with major stocks at Wall Street sinking nearly 2 per cent each as crude oil posted its biggest two-day drop in nearly seven years and as concerns over a faltering global economic recovery exacerbated. Tumbling equities bolstered the appeal of the bullion as an alternative asset. However, caution ahead of the US jobs data later this week which may show that the world’s biggest economy added a robust 190,000 jobs in January, signaling a strong ongoing labour market recovery, trimmed gains in the bullion. The jobs data may offer cues over the timing of the US Federal Reserve’s next interest rate rise after a maiden lift-off in December since 2006. While tepid recent economic data with consumer spending standing little changed in December and manufacturing contracting in January, coupled with the continued global financial volatility, have pared back bets over further tightening in borrowing costs, Kansas City Fed President Esther George on Tuesday stressed that the recent financial turmoil was anticipated, meaning that there is no reason why the Fed should delay tightening interest rates further. Gold may trade on a cautious note today ahead of US private payrolls and services data for January. At the MCX, Gold futures for February 2016 contract closed at Rs 26,891 per 10 gram, up by 0.41 per cent after opening at Rs 26,848, against the previous closing price of Rs 26,782. It touched the intra-day high of Rs 26,998.
Gold prices rose by 0.44 per cent on Wednesday with the continued focus on likely Federal Reserve steps on interest rates this year. Investors continued to digest dovish comments from an influential Federal Reserve policymaker on the increased possibility of a delayed interest rate hike from the US central bank.
Further, a weaker dollar raised the appeal of gold as an alternative asset. Weaker greenback makes the bullion cheaper for those holding other currencies, thus increasing demand.
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