Gold advances as chances of Fed rate hike recede

Gold prices rose modestly last week, buoyed by hopes the US Federal Reserve will not raise interest rates at its policy meeting this month. The afternoon fixing on Friday in London was $1,963.25 an ounce, compared with $1,947.90 a week earlier. Thai selling prices were quoted at 32,200 baht per baht-weight (15.2 grammes), up 100 baht from the previous week.

The resolution of uncertainty about the US debt ceiling reduced safe-haven demand, but gold held its own, even as a strong US jobs report led some to believe the Fed might consider one more rate hike when it meets on June 13-14.

Gold, which suffers when rates are higher, found support during the week as markets scaled back expectations to a 24% chance of the Fed hiking rates in June, compared with a 64% chance seen one week ago.

Physical gold demand slowed in India as a recovery in domestic prices led buyers to postpone purchases, while weakening of the Chinese currency underpinned premiums.

Indian dealers were charging a premium of up to $4 an ounce over official prices, up from $3 the week before.

“Price movements are confusing buyers. Many potential buyers are waiting for the prices to correct,” said a Mumbaibased dealer.

Local gold prices were trading around 60,200 rupees per 10 grammes on Friday, after falling to 59,225 rupees a week earlier.

In China, premiums ranged from $1.50 to $9 an ounce over international benchmarks. A weakening yuan on concerns of a slowing Chinese economy may prompt higher premiums of around $10-15, said Bernard Sin, regional director of the metals trader MKS PAMP.

Some analysts said domestic demand for safe-haven bullion was still lukewarm.

“Consumers may be eyeing a further drop in prices towards $1,850 an ounce before resorting to physical purchases,” said Debajit Saha, lead metals analyst at LSEG. REUTERS