Gold rises on ex­pec­ta­tions of Fed pol­icy tight­en­ing pause, eq­ui­ties pull­back

Business World - - World Markets -

BEN­GALURU — Gold prices rose on Mon­day as the dol­lar fell on ex­pec­ta­tions that the US Fed­eral Re­serve will not raise rates this year and as Asian stocks tum­bled af­ter lack­lus­ter China data pointed to a slow­down in the world’s sec­ond-largest econ­omy.

Gold tends to gain on ex­pec­ta­tions of lower in­ter­est rates, as they cut the op­por­tu­nity cost of hold­ing a non-yield­ing bul­lion and trims the de­mand for US dol­lar, mak­ing the yel­low metal less ex­pen­sive for hold­ers in other cur­ren­cies.

Spot gold was up 0.4% at $1,291.97 per ounce, as of 0610 GMT.

US gold fu­tures were up 0.2% at $1,292.10 per ounce.

The weak­ness in eq­ui­ties and US dol­lar ap­pear to be a bond­ing pro­vid­ing sup­port for gold, said Michael McCarthy, chief strate­gist, CMC Mar­kets and Stock­broking.

“There is a key re­sis­tance be­tween $1,290 and $1,310. Gold will need to do sub­stan­tial work to rise above this level as gen­er­ally we see traders short­ing into it.”

The US cen­tral bank had the abil­ity to be pa­tient on mone­tary pol­icy given sta­ble price mea­sures, US Fed­eral Re­serve Chair­man Jerome Pow­ell said last week, and he down­played pre­dic­tions from pol­icy mak­ers sug­gest­ing in­ter­est rates would be raised twice more this year.

“The mar­ket feels there is a shift in the Fed’s stance and it is more ac­com­moda­tive and we are see­ing the dol­lar weak­en­ing for sev­eral ses­sions,” Mr. McCarthy said.

Mean­while, Asian shares tum­bled on Mon­day af­ter a shock con­trac­tion in Chi­nese De­cem­ber ex­ports, which fell 4.4% from a year ear­lier, the big­gest monthly drop in two years, of­fi­cial data showed on Mon­day.

Spot gold has gained over 11% since hit­ting a one-and-ahalf year low in mid-Au­gust at $1,159.96 due to volatile stock mar­kets and a weaker dol­lar.

“The pre­cious met­als sec­tors con­tinue to ben­e­fit from a weaker US dol­lar and pe­ri­odic weak­ness in eq­uity mar­kets,” ANZ said in a re­search note.

“The geopo­lit­i­cal risks have also started to in­duce some safe-haven buy­ing. In­vestors are be­com­ing in­creas­ingly wor­ried about the Brexit ne­go­ti­a­tions. At the same time, there ap­pears no end in sight for the US gov­ern­ment shut­down,” ANZ noted added.

A par­tial US gov­ern­ment shut­down over Pres­i­dent Don­ald Trump’s de­mand for $5.7 bil­lion to build a wall along the US-Mex­ico bor­der en­tered its 24th day on Mon­day, with no end in sight.

Spot gold re­mains neu­tral in a range of $1,279-$1,299 per ounce, and an es­cape could sug­gest a di­rec­tion, ac­cord­ing to Reuters tech­ni­cal an­a­lyst Wang Tao.

Among other pre­cious met­als, pal­la­dium fell 0.8% to $1,306.99 an ounce. It hit a record high at $1,342.43 last week.

Plat­inum slipped 0.2% to $809.20, while sil­ver traded steady at $15.59 an ounce. —

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