Gold extends gains on weaker US equities

Gold futures on the COMEX division of the New York Mercantile Exchange extended gains on Tuesday as U.S. equities weakened.

The most active gold contract for June delivery rose 2.7 U.S. dollars, or 0.21 percent, to settle at 1,276.90 dollars per ounce.

The precious metal was given extensive support as the U.S. Dow Jones Industrial Average fell by 207 points, or 1.17 percent, as of 18:30 GMT. Analysts noted 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.

In light of this weakness, the U.S. Federal Reserve is trying to decide when to increase interest rates. Traders believe that the Fed may raise rates from 0.50 to 0.75 during the July FOMC meeting. According to the CMEGroup' s Fedwatch tool, the current implied probability of a hike from 0.50 to 0.75 is at 36 percent at the July 2016 meeting.

The precious metal was prevented from rising further as stronger-than-expected economic data put pressure on gold. The industrial production report released by the U.S. central bank on Tuesday showed its headline index increasing by 0.7 percent, which was much better than expected. Analysts note that this is the largest increase for a single month since November 2014.

The consumer price index (CPI) report, released on Tuesday by the U.S. Department of Labor, also showed better-than-expected results, with a 10 percent monthly increase in gasoline costs leading the key CPI measure to increase by 0.4 percent, which was on the high end of expectations. Analysts noted that this figure also put pressure on gold.

Silver for July delivery rose 9.6 cents, or 0.56 percent, to close at 17.25 dollars per ounce. Platinum for July delivery added 1 dollar, or 0.09 percent, to close at 1,054.40 dollars per ounce.