You are here: Home » Markets » Commodities » Precious Metals
Business Standard

Gold hits 2-week high on hopes Fed will not raise rates soon

Spot gold was up 0.4% at $1,248.30 an ounce by 0355 GMT. It hit a high of $1,249.20 earlier in the session, its strongest since May 24


Reuters  |  BENGALURU 


touched a fresh two-week high on Wednesday as the possibility of an early US interest rate hike appeared to dim following dovish comments by Federal Reserve chair Janet Yellen earlier this week.

Yellen gave a largely upbeat assessment for the US economy on Monday and said interest rate increases were coming, but investors focused on her lack of guidance about when.

Spot was up 0.4% at $1,248.30 an ounce by 0355 GMT. It hit a high of $1,249.20 earlier in the session, its strongest since May 24.

US climbed 0.3% to $1,251.20.

"The direction for this week will be a little quiet (for gold), waiting for the FOMC meeting next week. But I think nothing is going to change due to disappointing non-farm payroll data," said William Wong, assistant head of dealing at Wing Fung in Hong Kong.

Weak US payrolls data, released last week, has boosted expectations that the Fed will stand pat on interest rates for the time being. Gold is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding bullion.

Gold, which slid more than 6% in May, has risen about 2.7% so far this month on dampened expectations of an early rate hike.

The World Bank slashed its 2016 global growth forecast on Wednesday, which could also throw cold water on a possible Fed move.

"It boils down to how the Fed will take into consideration this global slowdown. If they take this very seriously and show no urgency in a rate hike then it will be a boon for gold," said Helen Lau, an analyst at Argonaut Securities in Hong Kong.

The world's biggest consumer of the yellow metal, China, kept its gold reserves unchanged, at 58.14 million fine troy ounces at the end of May, from the end of April, the central bank said on Tuesday.

Analysts, however, said China still has enormous US dollar holdings and is likely to keep purchasing gold in order to diversify its forex reserves, which should serve as a supportive factor for the metal.

Asian shares were flat on Wednesday, as weak Chinese export data offset a brightening energy sector outlook, while the dollar stood near its four-week lows.

Among other precious metals, silver was up 0.6% at $16.48 an ounce, platinum rose 0.2% to $1,000.50 and palladium was 1% higher at $559.53.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Wed, June 08 2016. 11:15 IST