Gold cuts biggest rise in two weeks as stocks jump on Fed signal

[NEW YORK] Gold pared the biggest advance in almost two weeks as global equities surged after Federal Reserve Chair Janet Yellen reasserted the central bank's gradual approach to raising US interest rates.

Bullion for immediate delivery fell 0.4 per cent to US$1,236.85 an ounce by 10.50 am in Singapore, according to Bloomberg generic pricing. The metal ended 1.7 per cent higher on Tuesday after Ms Yellen's remarks, the most since March 16. A gauge of the US currency was little changed after dropping 0.8 per cent a day earlier.

Gold is this year's best performing commodity on speculation that the Fed may refrain from further tightening to protect the recovery in the world's largest economy.

In comments at the Economic Club of New York, Ms Yellen indicated deteriorating world growth warranted a slow approach. Bullion is 17 per cent higher this quarter as investor holdings in exchange-traded products have expanded by 300 metric tons.

While "gold bugs might like to stay bullish, they are not foolish and would like to take profit from the recent rally," Mark To, head of research at Wing Fung Financial Group, a trader and refiner in Hong Kong, said by e-mail.

In the second quarter, the metal may rise to as much as US$1,400 as it's now clear the Fed will proceed cautiously, he said.

In China, bullion of 99.99 per cent purity jumped as much as 1.7 per cent to 259.32 yuan a gram (US$1,243.37 an ounce) on the Shanghai Gold Exchange and was at 258.55 yuan.

Asian stocks tracked a surge in the US, with the MSCI Asia Pacific index rising 1 per cent on Wednesday.

While lower rates are a boon for gold, the rally in global equities may erode demand for the metal as a store of value.

Other precious metals declined on global markets. Spot silver retreated 0.4 per cent to US$15.3027 an ounce, platinum fell 0.7 per cent to US$962.95 an ounce and palladium lost 0.4 per cent to US$575.10 an ounce.

BLOOMBERG