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Gold price rises to three-week high on dovish Fed minutes

October 9, 2015

London (Oct 9)  Gold rose to a three-week high on Friday after minutes from the Federal Reserve's last policy meeting showed the U.S. central bank was in no hurry to raise interest rates.

Spot gold was up 1.2 percent at $1,152.06 an ounce by 0430 EDT, after touching a three-week peak of $1,154 earlier in the session.

Prices were supported by Fed minutes released on Thursday, suggesting the central bank was deeply cautious even before last week's soft jobs data showed a sharp slowdown in U.S. hiring.

"We still see fairly strong demand," said Hamza Khan, head of commodities strategy at ING Bank. "The stage on the fundamental side is set for higher prices and the longer the Fed holds off on a rate hike, the stronger the picture is for gold."

Khan added the metal could rally as high as $1,200 in the next week, hitting levels last seen in late June.

But the market remained somewhat cautious on Friday, taking note that the minutes also revealed most Fed policymakers thought the central bank's first rate increase in nearly a decade should still come in 2015.
 
Gold has come under pressure from expectations that the central bank will raise interest rates this year, potentially lifting the opportunity cost of holding non-yielding bullion.

But weak U.S. economic data and worries about the global economy have prompted many to push back expectations, which has helped gold gain more than 3 percent so far this month.

A possible delay in a rate increase has also weighed on the dollar, which has been supportive for the gold market by making the metal cheaper for holders of other currencies.
 
Friday's rally helped gold recover some of the losses from Thursday, when it closed 0.6 percent down despite a softer dollar. The metal is on course to gain 1.3 percent for the week.

Among other precious metals, silver was up 1.6 percent at $15.91, after hitting a 3-1/2 month high earlier this week.

Platinum rallied 3.5 percent to $977 a tonne, rising to its highest since Sept. 21, and on course for a 7.6 percent gain this week, its best weekly performance since October 2011.
 
The recent spike in prices follows Glencore's announcement earlier this week that it will shut its Eland platinum mine in South Africa due to low prices and a difficult market environment.

The metal dipped near a seven-year low last week on concerns that the Volkswagen emissions scandal would reduce demand for diesel cars, in which the metal is used in catalysts.

Palladium rose 1.6 percent and was headed for its fifth straight weekly gain.

Source: Reuters

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