Gold gains as Fed's softer stance hurts dollar
London (Feb 19) Gold rose on Thursday on a weaker dollar after minutes from January's Federal Reserve policy meeting showed officials expressed concern that raising interest rates too soon could damage the U.S. economic recovery.
Spot gold was up 0.4 percent at $1,217.85 an ounce by 1025 GMT, extending a late rebound staged in the previous session.
U.S. gold futures for April delivery gained $17.60 an ounce to $1,217.90.
Spot prices had fallen to a six-week low of $1,197.56 on Wednesday, when hopes for a successful resolution to Greece's debt talks boosted investor appetite for risk.
"Bears were firmly in control until the dovish comments from the (Fed) minutes came out ... the market was surprised with most expecting the first of many rate (increases) in June - this now looks to be off the table," Tony Walters, senior metals analyst at Deutsche Borse's MNI International, said.
"There's a good chance of some more short-covering as investors trim back their exposure in light of the new rate expectations."
The minutes from the Fed's Jan. 27-28 meeting, released on Wednesday, showed officials grappling to square solid U.S. economic growth with weakness in international markets, as well as worrying about falling inflation expectations.
The Fed has kept rates near zero since 2008 to stimulate the U.S. economy, benefiting non-interest-bearing assets such as gold. Any increase would lift the dollar, hurting demand for bullion.
Traders also kept an eye on developments in Europe, where Greece is negotiating with its creditors to solve a debt crisis.
Greece is expected to ask on Thursday for an extension to its "loan agreement" with the euro zone as it faces running out of cash within weeks, but it must overcome resistance from sceptical partners led by Germany.
Failure to reach an agreement could see Greece exiting the euro zone, potentially triggering flight-to-safety bids for gold, although markets believe a last-minute agreement will be negotiated.
Liquidity will remain thin in Asia through the week as several markets are closed for the Lunar New Year holiday.
Gold imports into top consumer India are set to jump in coming months after the central bank eased gold import curbs.
Silver was down 0.9 percent at $16.64 an ounce, while platinum fell 1.3 percent to $1,180.40 an ounce, after reaching a 5-1/2-year low at $1,163.75 on Wednesday. Palladium rose 1.2 percent to $775.55 an ounce.
Source: Reuters
