Gold climbs as greenback hits multi-month lows on soft US rate outlook

NEW YORK/LONDON — Gold climbed on Monday and was likely to see further gains after the dollar slumped to multi-month lows on the back of data that pointed to weak US inflation and dampened prospects for rate hikes.

“The dollar continues to be on the back foot and yields have dropped back somewhat from their relatively elevated positioning lately,” said analyst Jonathan Butler at Mitsubishi in London.

Spot gold was up 0.50% at $1,234.61 an ounce by 2:53 p.m. EDT (1853 GMT), while US gold futures for August delivery settled up 0.50% at $1,233.70.

“If gold remains at $1,230 or goes higher, there’s an elevated risk that some of those short positions might start to be reversed and that would give some further upside to gold,” Butler said.

Gold prices slightly pared gains as the US dollar came off its lows after hitting its lowest level against a basket of major currencies in 10 months as recent soft US inflation and domestic demand figures undermined arguments for the Federal Reserve to raise interest rates.

A weaker greenback supports gold since the dollar-priced commodity is less expensive for investors holding other currencies.

“Investor sentiment (for gold) has improved quite dramatically over the past week, especially with the weak data out of the United States last week,” said ANZ analyst Daniel Hynes. “Gold is now primed for another rally.”

The day’s move took spot gold above the 200-day moving average near $1,230 per ounce.

“The technical bounce looks fairly solid,” Hynes said.

Gold’s performance, however, has been relatively disappointing, UBS strategist Joni Teves said.

“There are enough supportive factors currently and we think the downside has now likely been contained. But at the same time, there is also a lack of catalysts strong enough to encourage investors to chase gold higher here,” Ms. Teves said in a note.

Among other precious metals, platinum gained 0.90% at $923.74 per ounce after touching $934.40, the highest since June 15. Spot silver rose 1.20% at $16.13 per ounce, after hitting $16.19, the highest in nearly two weeks. Analysts polled by Reuters cut their average 2017 silver forecast to $17.32 an ounce from $17.98 after the metal slid 9% last quarter.

Palladium added 1% to $866.88 per ounce. “We saw a triple bottom form in platinum last week along with the lows of May and December. When that happens that tends to be a pretty solid support level,” Mr. Butler said. —