Gold soars for second straight day, following Yellen's dovish comments

New York (Mar 20)  Gold prices soared for the second consecutive session, one day after somewhat dovish comments from Federal Reserve chair Janet Yellen regarding a potential interest rate hike helped the precious metal rebound from an extended slump.

On the Comex division of the New York Mercantile Exchange, gold futures for April deliveries rose $16.20 or 1.41% to 1,167.50 a troy ounce. Earlier in Asian trading, gold prices increased by more than $20 to reach a daily-high of $1,177 as Asian traders had the first opportunity to react to Ms. Yellen's highly-anticipated statement.

On Wednesday gold futures also gained more than $15 an ounce, days after prices dipped near $1,150 in anticipation of a rate hike by the Fed.

Although the Federal Open Market Committee removed a reference to remaining patient from its minutes on Wednesday, Yellen insisted that it does not mean that the Fed will raise interest rates by June at the earliest. On the contrary, Yellen asserted that the timing of the decision will be "data dependent," as the Fed considers indicators such as GDP growth, wage increases and inflation.

Yellen also appeared to strike a dovish tone with forecasts for weaker inflation and GDP growth. The Fed expects Real GDP to grow between 2.1 and 3.1% for the remainder of 2015, a figure significantly below previous estimates. In terms of inflation, the Fed anticipates that it will reach a level of 0.6% to 0.8% in 2015 and 1.7% to 1.9% in 2016. Last month in testimony before Congress, Yellen said that the Fed wanted to see inflation move toward its target goal of 2% before it raised interest rates.

The price of gold typically remains higher in periods of low interest rates, as the precious metal struggles to compete with high-yield assets.

Yellen's comments also sent the dollar plunging on Wednesday, as it fell more than 2.5% against the euro to post its worst daily loss since March, 2009. While the dollar rebounded on Thursday by gaining more than 2% against its European counterpart, EUR/USD still remained at 1.063 - far above last week's 12-year low of 1.05.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, rose 2.20 to 99.58 on Thursday. A day earlier, the index moved below 95.00 as it reached a three-week low.

Dollar-denominated commodities such as gold become more expensive for foreign purchasers when the dollar becomes stronger.

Elsewhere, silver for May delivery rose 3.36% or 0.522 to 16.063 an ounce.

Copper for May delivery also gained 3.41% or 0.88 to 2.658 a pound, one day after reaching a three-week low.