Gold gains, dollar sags on Fed remarks

Palladium down after hitting record high on Wednesday, while spot gold and silver rose

Gold prices firmed yesterday as the dollar faltered following dovish comments from US Federal Reserve Chair Jerome Powell, calming investor concerns over the pace of rate hikes.

Spot gold was up 0.4 per cent at $1,225.34 (Dh4,500) per ounce at 0700 GMT. Prices climbed about 0.6 per cent on Wednesday, their biggest oneday percentage gain since November 16.

US gold futures were up 0.1 per cent at $1,225.1 per ounce.

“The dovish Fed stance was relatively constructive from pure dollar trade perspective and it could edge off the dollar and continue to do so until the year end, which is quite significant for gold prices,” said Stephen Innes, APAC trading head at OANDA in Singapore.

The dollar slipped from a two-week high on Wednesday after Powell said interest rates are just below neutral, raising expectations that the US central bank is closer to the end of its rate hike cycle.

A weaker greenback makes the dollar-denominated gold cheaper for other non-US buyers. However, gains in gold were being limited by increased interest in riskier assets, analysts said.

A robust Wall Street was buoyed Asian shares yesterday. MSCI’s broadest index of AsiaPacific shares outside Japan rose 0.6 per cent.

Metals this year

Investors expect more clues on the Fed’s monetary tightening path from the minutes of the US central bank’s November 7-8 meeting. The Fed has raised rates three times this year. Higher US rates tend to boost the dollar, and also raise the opportunity cost of holding gold, which does not pay interest.

Gold prices lost to the dollar this year as investors preferred the safe-haven currency as the US-China trade war unfolded and US rates rose. Among other precious metals, spot silver rose 0.3 per cent to $14.36 per ounce.

Palladium fell 0.8 per cent to $1,174.50 per ounce, having hit a record high of $1,186.3 in the previous session. Platinum rose 1 per cent to $829.10 per ounce after falling to a seven-week low of $809.50 on Wednesday.