Gold price stays firm after Fed meeting fuels the bulls

London (July 28)  Gold prices trekked higher on Thursday, with investors emboldened by a Federal Reserve policy statement that they read as more dovish than bullish.

Gold for September delivery GCU6, +1.09% rose $12.70, or 1%, to $1,339.40 an ounce, setting it on track for the highest close since July 13.

The contract had also rallied in electronic trade on Wednesday to trade at $1,348.80 an ounce, up more than $14 from the day’s regular settlement price.

The spike late Wednesday was due to the fact many gold investors believe the Fed is dovish even if it left a September interest-rate increase on the table. To some traders that statement emphasized a reluctance to lift rates too quickly, in the wake of the U.K.’s decision to exit the European Union, which can be supportive for gold futures.

Read: Fed appears more willing to lift interest rates in September 

“With optimism still visible over the Fed taking action in 2016, the main driver behind gold’s resurgence could be risk aversion,” said Lukman Otunuga, FXTM research analyst, in a note to clients.

“It should be kept in mind that anxiety is mounting ahead of the BOJ policy meeting while the visible fears over the global economy have attracted investors to safe-haven investments,” he added.

The Bank of Japan concludes its two-day policy meeting on Friday, and hopes have been running high that the central bank will announce monetary easing in conjunction with a fiscal stimulus package from the government.

Read: Investors braced for letdown from Bank of Japan as expectations ride high

Dollar weakness was also giving gold a lift, as it moved lower against major crosses BUXX, -0.19% notably the Japanese yen. Gold and the dollar often have an inverse relationship.

Source: REuters