Gold hits five-week high on dimmed Sept rate hike hopes


Gold hit its high­est in nearly five weeks on Thurs­day af­ter meet­ing min­utes from the U.S. Fed­eral Re­serve sug­gested pol­i­cy­mak­ers were in no hurry to raise in­ter­est rates.

Although agree­ing that the econ­omy was near­ing a point where rates should move higher, Fed of­fi­cials last month were wor­ried that lag­ging in­fla­tion and a weak global econ­omy posed risks too big to com­mit to a rate "lift-off". "There was a lot of dis­cus­sion in the min­utes about how to tighten pol­icy and that shows that the cen­tral bank is mov­ing to­ward it but there is some un­cer­tainty about the date," Mac­quarie an­a­lyst Matthew Turner said. "For gold, one would think that the direc- tion is more im­por­tant than the date."

Spot gold hit a high of $1,141.75 an ounce, its high­est since July 17, and was up 0.4 per­cent at $1,138.50 as of 0951 GMT. U.S. gold for De­cem­ber de­liv­ery was up 0.9 per­cent to$1,137.90 an ounce.

Spot gold has re­cov­ered nearly 6 per­cent from a 5-1/2-year low of $1,077 hit in a late July rout, when in­vestors cut their ex­po­sure on fears of fur­ther price declines. It was on track for a sec­ond weekly gain, af­ter snap­ping its long­est re­treat since 1999. Gold ben­e­fited last week from un­cer­tainty posed by China's sur­prise de­val­u­a­tion of its yuan cur­rency.

"What's sup­port­ing gold is that from un­re­lent­ingly bad news, which we saw un­til late July-early Au­gust, the news flow has been more bullish to gold af­ter the Chi­nese cen­tral bank cur­rency de­val­u­a­tion," Mac­quarie's Turner said. "But you'd have to think that be­cause of the rate hike the dol­lar would rise from here, so it's hard to get too ex­cited." The dol­lar stead­ied against a bas­ket of lead­ing cur­ren­cies, re­cov­er­ing losses made af­ter the min­utes re­lease from the July 28-29 Fed meet­ing. A po­ten­tial de­lay in a rate in­crease to De­cem­ber could how­ever of­fer some short-term up­side po­ten­tial for non-in­ter­est bear­ing gold.

An­a­lysts had been bet­ting on a rate hike when Fed of­fi­cials next meet on Septem­ber 16-17 given sus­tained strength in the world's largest econ­omy. How­ever, some thought pol­i­cy­mak­ers might take a grad­ual ap­proach to lift­ing rates af­ter China's yuan de­val­u­a­tion.

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