1st LD Writethru: Gold up on weakness of U.S. dollar

Gold futures on the COMEX division of the New York Mercantile Exchange rose Tuesday as the U.S. dollar showed weakness.

The most active gold contract for February delivery rose 14.9 U.S. dollars, or 1.35 percent, to settle at 1,120.2 dollars per ounce.

The precious metal was given support as the U.S. Dollar Index fell by 0.12 percent to 99.16 as of 1800 GMT. The index is a measure of the dollar against a basket of major currencies. Gold and the dollar typically move in opposite directions, which means if the dollar goes up, gold futures will fall as gold, measured by the dollar, becomes more expensive for investors.

Gold was prevented from rising further as the U.S. Dow Jones Industrial Average went up by 1.83 percent as of 1800 GMT. Analysts note that when equities post losses, the precious metal usually goes up, as investors are looking for a safe haven, while the opposite is true when U.S. equities post gains.

The Federal Open Market Committee (FOMC), the policy-setting arm of the U.S. Federal Reserve, began its two-day meeting Tuesday, giving further support to the precious metal, as traders tendered bets that the Fed would signal cautiousness on raising interest rates in the wake of global economic uncertainty.

Analysts believe the market remains unsure of when the next rate hike, from a 0.50 rate to a 0.75 rate, will occur. Traders are wagering that, at the earliest, the Fed may raise rates from 0.50 to 0.75 during the March FOMC meeting. The current implied probability of a hike from 0.50 to 0.75 is at 30 percent for the March meeting, and 13 percent for the January meeting.

A report released by the New York-based Conference Board prevented gold from rising further as the consumer confidence report showed its key measure rising to 98.1 during the month of January, which analysts note was better-than-expected.

Traders will be carefully watching the release of the Gross Domestic Product numbers from the U.S. Department of Commerce Friday for hints on the performance of the American economy in the past quarter.

Silver for March delivery rose 31 cents, or 2.17 percent, to close at 14.564 dollars per ounce. Platinum for April delivery added 15.4 dollars, or 1.79 percent, to close at 876.9 dollars per ounce. Endit