Gold price bounces from multi-year low as weak dollar sparks rebound
New York (Nov 19) Gold rose 1 percent on Thursday, rebounding from near six-year lows as indications from the Federal Reserve that it may move cautiously into the rate hiking cycle weighed on the dollar and prompted investors to cover short positions.
Fed officials on Wednesday continued to flag December as a likely time for U.S. interest rates to rise after seven years near zero, but the central bank signalled an intention proceed slowly and steadily after that.
Rising rates tend to weigh on gold, as they lift the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced. Expectations that rates will rise have pushed gold prices down 9 percent this year.
Spot gold was up 1.1 percent at $1,082.80 an ounce, while U.S. gold futures for December delivery were up $13.40 at $1,082.10. The metal hit its weakest since February 2010 on Wednesday at $1,064.85.
"I think this is pre-Thanksgiving week short-covering which has its roots in the Fed minutes yesterday," Simon Weeks, head of precious metals at the Bank of Nova Scotia, said. "(These) basically still imply a December hike, but they changed the wording slightly."
"That has made people think it might not be such a one-way bet after all. The market has been under the cosh for a while, so I think people are taking some money off the table."
The dollar fell against most other major currencies on Thursday, with some analysts arguing that it will now take more than next month's expected action on U.S. monetary policy to drive it higher.
World shares and risk assets rallied after the Fed flagged a rate hike next month, but also an intention to move cautiously on rates from there.
Silver was up 1.1 percent at $14.32 an ounce, while platinum was up 0.6 percent at $850.85 an ounce and palladium was up 0.5 percent at $536.25 an ounce.
Platinum is recovering after hitting its lowest since December 2008 on Wednesday, at $840.40 an ounce, despite an expected deficit in the platinum market this year.
"We would argue that the focus on deficits is misplaced," Macquarie said in a note. "It is at least as likely the platinum price is weak because the platinum market is in deficit, i.e. the deficit reflects ongoing liquidation of unwanted above-ground stock and other actors (such as autocatalyst recyclers) are having to adjust their behavior to cope with that."
Source: CNBC
