By Maytaal Angel
LONDON (Reuters) - Gold rose on Wednesday as investors overlooked the precious metal's failure to capitalise on this week's global stock market rout and held onto the view that the dollar's bear run remains in place despite rate hike expectations.
The dollar rose slightly against a currency basket but fell half a percent to the yen as investors remained cautious after a heavy selloff in stock markets, with many viewing safe havens like the yen as undervalued.
A weaker dollar makes dollar-priced gold cheaper for non-U.S. investors.
"The general scenario for gold is still positive. What we are seeing now (on the stock markets) is just a correction, and the dollar is still weakening," said Carlo Alberto De Casa, chief analyst at Activtrades.
"I'm expecting gold to remain above $1,300 in the next few months. The problem for gold would be four (U.S.) rate hikes, but I don't believe (that will happen). At this stage inflation is still under control," he added.
Spot gold was up 0.2 percent at $1,328.13 per ounce, as of 1105 GMT. Prices fell over 1 percent to hit their lowest since Jan. 11 at $1,319.96 on Tuesday. U.S. gold futures for April delivery rose 0.1 percent to $1,330.70 per ounce.
World stocks clawed their way back from two-month lows on Wednesday, though momentum was weak and U.S. futures suggested Wall Street could lapse back into losses after rebounding from the biggest selloff in six years.
Traders dialled back bets the U.S. central bank would ratchet up the pace of rate increases on Monday to between two and three hikes from three to four hikes last week, according to interest rates futures.
"Some dip-buying is coming back aggressively (in gold) as the volatility index drops. Also, some good buying as the short-term U.S. (interest) rate curve is easing off a bit," said Stephen Innes, APAC trading head for OANDA.
SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 1.4 percent to 829.27 tonnes on Tuesday from Monday.
Holdings saw their worst one-day fall since December 2016.
Spot gold may test a support at $1,316 per ounce, as suggested by a retracement analysis and a head-and-shoulders, according to Reuters technical analyst Wang Tao.
Spot silver climbed 0.3 percent to $16.68 per ounce.
Platinum fell 0.6 percent to $983.50 per ounce after touching its lowest since Dec. 12 earlier.
Palladium edged down 1.1 percent to $997.75 per ounce, having touched its lowest since Dec. 8.
(Additional reporting by Nithin Prasad and Nallur Sethuraman; Editing by Susan Fenton)
Disclaimer: No Business Standard Journalist was involved in creation of this content
