Gold Rebounds as Some Fed Officials Argue Rates Should Stay Low
New York (Feb 18) Gold prices rebounded from a six-week low after minutes from the Federal Reserve’s last meeting showed some officials argued for keeping interest rates near record lows for longer.
The policy makers pointed to a strengthening dollar, international flash points from Greece to Ukraine and slow wage growth as weakening the case for the first rate rise since 2006, according to a record of the Jan. 27-28 meeting released Wednesday. Higher borrowing costs cut gold’s allure because it generally offers returns only through price gains.
The metal dropped 29 percent in the previous two years as the U.S. economy gained traction, increasing concern that the central bank would raise borrowing costs. The metal has rebounded in 2015, climbing about 2 percent, as slowing foreign economies may become a drag on American expansion. The dollar last week reached the highest since at least 2004 against a basket of 10 major counterparts, threatening the appeal of exports.
“The strength of the dollar is an issue, and if it wasn’t for that, I think the Fed would have no reason to be as dovish as they are,” Krishna Memani, the New York-based chief investment officer at OppenheimerFunds Inc., said in a telephone interview. “Gold has no yield, so any time expectations increase of rates remaining low for a while, gold pops up on the other side.”
Spot Prices
Gold for immediate delivery rose 0.1 percent to $1,210.85 an ounce at 2:40 p.m. in New York, according to Bloomberg generic pricing, after falling as much as 1 percent.
The metal earlier touched $1,197.72, trading below $1,200 for the first time since early January. Fed Bank of Philadelphia President Charles Plosser said Tuesday that the central bank is “really close” to raising rates. The policy makers next meet March 17-18.
Billionaire hedge fund manager John Paulson stuck with his holding in the world’s biggest gold exchange-traded product, even as other investors are dumping the metal. Paulson & Co., the largest holder of the SPDR Gold Trust, kept its stake at 10.23 million shares in the three months ended Dec. 31, a government filing showed Tuesday.
On the Comex in New York, gold futures for April delivery fell 0.7 percent to close at $1,200.20, before the minutes were released. Prices erased declines in electronic trading after the settlement.
Silver futures for March delivery lost 0.7 percent to settle at $16.265 an ounce on the Comex. Platinum and palladium dropped on the New York Mercantile Exchange.
Source: Bloomberg
