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1st LD Writethru: Gold up on weaker U.S. equities, dollar

Xinhua, February 20, 2016 Adjust font size:

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

The most active gold contract for April delivery rose 4.5 U.S. dollars, or 0.37 percent, to settle at 1,230.8 dollars per ounce.

Gold was given support as the U.S. Dollar Index fell by 0.13 percent to 96.72 as of 1700 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.

The precious metal was given further support as the U.S. Dow Jones Industrial Average fell by 43 points, or 0.27 percent, as of 1700 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.

A report released by the U.S. Department of Labor Friday put a cap on gold's increase as the reading of core consumer price index (CPI) increased by 0.3 percent during the month of January, which analysts note was much better than expected. The report showed the year-on-year increase was 2.2 percent.

Since this CPI report was much better than expected, analysts note that this was in line with expectations from the Federal Reserve. The same analysts believe this data hint that the previous Fed rate increase during the month of December was not a mistake. However despite this positive report, analysts now believe that a delay in the U.S. Federal Reserve's rate hike is inevitable due to economic instability. Prior to Fed Chairwoman Janet Yellen's address to Congress on Feb. 10, the U.S. central bank hinted that it could still raise rates in March. After Yellen's testimony to Congress suggesting that the increases would be gradual, many analysts believe that the next rate hike, from a 0.50 rate to a 0.75 rate, will occur much later in the year.

Traders are wagering that, at the earliest, the Fed may raise rates from 0.50 to 0.75 during the June Federal Open Market Committee (FOMC) meeting. According to the CMEGroup's Fedwatch tool, the current implied probability of a hike from 0.50 to 0.75 is at 11 percent at the April 2016 meeting, and 21 percent at the June 2016 meeting.

Meanwhile, silver for March delivery lost 5.9 cents, or 0.38 percent, to close at 15.373 dollars per ounce. Platinum for April delivery was unchanged, to close at 945.6 dollars per ounce. Endit