Gold near two-week high

London - Gold prices steadied around two-week highs on Tuesday after posting their biggest one-day rise since late January in the previous session, boosted by expectations that US interest rates will stay lower for longer and by gains in the euro.

The metal held above the 100- and 200-day moving averages it broke through on Monday after the Federal Reserve’s signal that it would keep interest rates near rock-bottom levels reassured buyers that theopportunity cost of holding bullion would stay low.

Spot gold was down 0.1% at $1 688.89 an ounce in midday trade after earlier hitting a fresh two-week peak at $1 696.20. US gold futures were up 0.2% at $1 688.40/oz.

Fed chairperson Ben Bernanke said on Monday the US economy needed to grow more quickly to cut the unemployment rate.

While he did not directly indicate the Fed was set to begin another round of bond purchases, he said a continuation of accommodative policies was needed to support faster growth.

“The Bernanke comments suggesting the possibility of further quantitative easing of monetary policy... pushed the US dollar lower and financial markets in general upwards, and so also gold,” said Commerzbank analyst Carsten Fritsch.

“The prospect of further liquidity injections should put pressure on the US dollar, and the prospect of continued negative real interest rates should also keep gold supported.”

The dollar fell to its lowest in four weeks against a basket of major currencies on Tuesday. The euro climbed to a one-month peak against the dollar in earlier trade.

Appetite for assets seen as higher risk also held firm after largely strengthening the previous day, with world stocks hitting a 2012 high on the back of Bernanke’s comments and on expectations the eurozone would agree to a bigger crisis firewall. European shares rose, and oil held above $125 a barrel.

US gold futures for April delivery were up $5.70 an ounce at $1 691.30. Options expiry is due on COMEX later in the day, with most call and put options concentrated around the $1 700/oz level.