Gold at 2-week highs on lower dollar as U.S. rate hike seen farther off
London (Oct 9) Gold climbed to its highest in two weeks on Thursday as the dollar fell after minutes of the last Federal Reserve policy meeting drove markets to push back expectations for the likely timing of an interest rate rise.
Spot gold rose to its highest since Sept. 26 at $1,229.80 an ounce early on Thursday, and was trading up 0.5 percent at $1,227.40 by 0956 GMT.
It rebounded nearly four percent from a 15-month low of $1,183.46 hit on Monday, under pressure from better-than-expected U.S. jobs data.
U.S. gold futures jumped two percent to a two-week high of $1,230.30 an ounce.
"The air has been cleared and we know that an early interest rate increase in the U.S. is not as likely as people had expected," MKS SA senior vice president said.
"A lot of people were expecting the market to break down, so those who have been caught short will continue to buy back in the near term."
The dollar was down 0.3 percent against a basket of major currencies, a drop to its lowest level in two weeks.
Minutes of the Federal Reserve's Sept. 16-17 meeting, released on Wednesday showed that Fed officials want to tie an interest-rate rise to U.S. economic progress. They however expressed concern about the dual threat of a rising dollar and economic slowdown in Europe and Asia, another factor behind its stance towards keeping an accommodative policy for the near future.
That prompted investors to bet that the Fed is in no rush to tighten after years of monetary stimulus.
The dollar had posted weekly gains for 12 consecutive weeks and its strength, coupled with a string of positive the U.S. economic data, had been driving gold's declines over the past few weeks. Investors tend to withdraw from non-interest-bearing assets to seek higher yields elsewhere when the dollar gains.
European shares also rebounded from the previous session's two-month lows on Thursday.
Equity markets and gold have both benefitted from a low interest rate environment and increased central banks' liquidity in the years after the 2008 financial crisis.
Despite a rebound in gold prices, which rose for four consecutive sessions, longer-term sentiment remains bearish on the prospect of further gains in the dollar.
"Despite the new interpretation of the minutes we still believe that the Fed's window to raise rates will be in the first half of 2015 and so do not see anything significantly changing in terms of the gold outlook," said INTL FCStone analyst Edward Meir.
Holdings in SPDR Gold Trust, the world's top gold-backed exchange-traded fund and a good proxy for investor sentiment, fell 5.38 tonnes to 762.09 tonnes on Wednesday - the lowest since December 2008.
On the physical side, premiums in Singapore over London have eased slightly to $4.52 from $5.44 on Wednesday, UBS said in a note.
Chinese buyers returned to the market on Wednesday after a one-week National Day holiday.
"The initial demand out of China is encouraging, especially as a full circle of players won't be back until Monday," UBS added.
Silver rose 1.3 percent to $17.54 an ounce. It hit its weakest level since March 2010 at $16.66 on Monday.
Platinum was up 0.3 percent at $1,276.75 an ounce, having fallen to $1,183.25 on Monday, while palladium rose 0.5 percent to $803.25 an ounce.
Source: Reuters
