Gold Advances Amid Speculation Fed Will Hold Off Raising Rates

London (May 22)  Gold rose from a one-week low as the dollar weakened on speculation U.S. policy makers will hold off raising borrowing costs.

The metal cut its biggest weekly loss since April as mixed U.S. data prompted investors to push back estimates for when the Federal Reserve will begin raising interest rates. Higher borrowing costs reduce the allure of gold, which generally only provides returns through price gains. Fed Chair Janet Yellen will speak on the economy later Friday.

“Yellen’s comments later today will be important for gold, as there is uncertainty over the timing of the first rate hike,” Jens Naervig Pedersen, an analyst at Danske Bank A/S in Copenhagen, said by e-mail. “If Yellen’s comments push back expectations of the first Fed hike, it may lend further support to the gold price.”

Gold for immediate delivery rose 0.6 percent to $1,212.02 an ounce by 10:33 a.m. in London, according to Bloomberg generic pricing. Prices are down 1 percent this week and reached the lowest since May 13 on Thursday. Futures for June delivery gained 0.6 percent to $1,211.30 on the Comex in New York.

Bullion advanced to a three-month high on Monday, before retreating on signs of an improving U.S. housing market. U.S. data also showed jobless claims fell to 15-year low, while manufacturing remained tepid. Minutes of the Fed’s last meeting showed many officials expected June would probably be too soon to boost borrowing costs.

Holdings in gold-backed exchange-traded products rose for the first time this week, according to data compiled by Bloomberg. Assets increased 1 metric ton to 1,604.1 tons, rebounding from the lowest since January.

Silver for immediate delivery climbed 0.7 percent to $17.282 an ounce, trimming the first weekly drop in four. Platinum added 0.3 percent to $1,158.33 an ounce, while palladium lost 0.3 percent to $777.96 an ounce.

Source: Bloombrg