Gold rises as equity sell-off spurs safe-haven buying

Gold prices rose on Tuesday as a rout in global equities prompted investors to seek shelter in safe havens such as gold, although expectations of more U.S. rate hikes this year weighed on the market.

Spot gold was up 0.4 percent to $1,345.12 per ounce at 0423 GMT following Monday's 0.5 percent gain. Prices fell 1.2 percent on Friday, the most since Dec. 7, 2017, after stronger-than-expected U.S. payrolls data shored up expectations that a pick-up in inflation will spur further rate hikes this year, boosting the dollar, in which it is priced.

U.S. gold futures for April delivery rose 0.9 percent to $1,348.00 per ounce on Tuesday. ANZ analyst Daniel Hynes said he suspected an even bigger rally in prices considering the correction in the equity markets.

"The rate hikes have already been priced in by the market... but it's certainly got the ability to temper the upside in gold prices," Hynes said. Asian shares fell sharply after Wall Street suffered its biggest decline since 2011 on Monday as investors' faith in factors underpinning a bull run in markets began to crumble.

Gold is seen as a safe-haven investment due to its ability to retain value even at times of financial or political uncertainty. It is also used as a hedge against inflation. Last week, the U.S. Federal Reserve kept interest rates unchanged but said inflation likely would rise this year and hinted at "further gradual" rate increases.

The yellow metal is highly sensitive to rising U.S. interest rates, as these increase the opportunity cost of holding non-yielding bullion, while boosting the greenback. Spot gold may retest a resistance at $1,354 as it seems to have stabilized around a support at $1,326 per ounce, according to Reuters technical analyst Wang Tao. Spot silver rose 1.1 percent to $16.92 per ounce.

It fell 3.7 percent on Friday in its biggest one-day decline since December 2016. Platinum gained 0.4 percent to $993.40 per ounce, while Palladium was down 1.8 percent to $1,012.00 per ounce after touching its lowest since Dec. 14, 2017. "The PGMs (platinum group metals) are certainly going to benefit from the better economic backdrop we're now seeing in 2018. In fact, I think the rest of the complex will certainly outperform gold in the medium term," Hynes said.

Palladium rose to an all-time high of $1,138 on Jan. 15 on higher automotive demand and supply shortage.

(Reporting by Nithin Prasad and Nallur Sethuraman in Bengaluru; Editing by Joseph Radford and Subhranshu Sahu)