Gold Breaks Above $1,800 as Dollar Weakens After Fed Commentary

(Bloomberg) — Gold extended gains as the dollar weakened after U.S. Federal Reserve officials played down prospects of aggressive rate hikes coming imminently.

European stocks and U.S. futures rose on Tuesday, while the dollar ticked lower amid the positive risk sentiment. Gold regained the psychologically important $1,800 an ounce mark, just above the level it averaged last year.

On Monday, Fed officials including Kansas City’s Esther George and San Francisco’s Mary Daly stressed that they want to avoid unnecessary disruptions to the U.S. economy as they prepare to start raising interest rates. It suggests little appetite for an aggressive 50 basis-point move in March, the prospect of which put gold under pressure last week.

Read: Fed Officials Stress Not Jamming Brakes on Economy as Hikes Loom

The market will be watching January’s U.S. jobs report, out on Friday, for clues on the trajectory for inflation. After bullion fell 2.4% last week, the biggest weekly decline since August, it gained 0.3% on Monday.

“Gold’s rebound may have gone too far already,” Edward Moya, senior markets analyst at Oanda Corp., wrote in a note, adding that traders were likely to sell into rallies as long as a Fed rate hike looms on the horizon. The U.S. central bank’s rate-cut focus will be the “constant theme that will disrupt any safe-haven flows that stem from geopolitical concerns or Chinese weakness,” he said.

There are some signs of increased investor appetite for gold. Exchange-traded funds tracked by Bloomberg added more than 5 tons of bullion on Monday, extending this year’s gain to 42 tons.

Spot gold added 0.5% to $1,806.06 an ounce as of 12:01 p.m. in London. The Bloomberg Dollar Spot index fell for a second day. Silver, platinum and palladium all gained. Markets in China and some other Asian countries will be closed for much of the week for the Lunar New Year holidays.