Gold Price Set for First Weekly Gain in a Month After Fed Holds Rates

London (Sept 18)  Gold bulls can thank the Federal Reserve for the first weekly advance in a month.

Bullion capped the biggest two-day advance in four weeks on Thursday, when Fed Chair Janet Yellen cited concern over slowing growth in China and turbulence in global markets for keeping interest rates unchanged. That’s good news for gold bulls, suffering from prices near a five-year low.

Gold is heading for a third annual decline as U.S. job growth boosted speculation the Fed would lift rates this year, even as inflation remained below the central bank’s target. While Yellen said most policy makers still expect a rate increase this year, traders pushed their bets to next year. Higher borrowing costs hurt bullion because the metal doesn’t pay interest, unlike some competing assets.

“All eyes have been on the Fed,” Mark O’Byrne, the executive director of Dublin-based brokerage GoldCore Ltd., said by phone. “The longer interest rates stay at these record low levels, the better for gold.”

Gold for immediate delivery climbed as much as 0.7 percent to a two-week high of $1,138.88 an ounce in London. It traded at $1,137.53 by 10:30 a.m., set for a 2.7 percent gain this week.

Producers Advance

A measure of the biggest producers compiled by Bloomberg jumped 11 percent to a three-week high. Harmony Gold Mining Co. and AngloGold Ashanti Ltd. led the gains. South Africa’s largest union for workers in the industry this week said it will ask members to accept an improved wage offer from mining companies.

Holdings in gold-backed exchange-traded products fluctuated between gains and losses four times in the past week, the longest run in two months. Investors own 1,516.5 metric tons through the funds, near the lowest since 2009, according to data compiled by Bloomberg.

“At some point in time the U.S. will raise rates and as such the upside for gold will continue to be limited,” David Govett, head of precious metals at broker Marex Spectron Group in London, said in an e-mailed report. “The world is exactly the same as it was yesterday. Quite frankly, there is no massive reason to get overly bullish of the precious complex.”

Platinum for immediate delivery lost 0.1 percent to $983.07 an ounce, while palladium added 0.2 percent to $611.90 an ounce. Silver rose 0.8 percent to $15.2725 an ounce, set for a 4.5 percent weekly gain that’s the most since May.

Source: Bloomberg