Expected slowdown in rate hikes keeps gold near record high

Bengaluru — Gold prices traded on Friday near a five-month high hit the previous session on expectations of a slowdown in US rate hikes next year, pushing bullion towards its biggest weekly gain since August.

Investors are focused on US non-farm payrolls data later in the day for clues on the future path of rate hikes by the US Federal Reserve.

Spot gold was up 0.2% at $1,240.38 an ounce at 11am GMT, having hit $1,244.32 an ounce in the previous session, its highest since July 17.

With a rise of nearly 1.5% this week, gold looked set to clock its best gain since the week of August 24.

US gold futures were also 0.2% higher at $1,246.40 an ounce.

“The reaction is rather muted, given the massive support from many sides, ie slumping stock markets, falling bond yields, falling Fed rate hike expectations,” said Commerzbank analyst Carsten Fritsch.

“Much will depend on the US jobs report today and how it will impact Fed rate hike expectations which have been scaled back so dramatically that a strong report could lead to a readjustment, putting gold under pressure,” he said.

Interest-rate futures suggested traders see less than one rate increase from the Fed next year, compared with previous expectations for possibly two rate hikes.

“If gold was ever going to stage a meaningful rally, it would be now. We are indeed in a risk-off environment with stocks and yields having fallen sharply, while the dollar hasn’t been doing too great either,” said Fawad Razaqzada, an analyst with Forex.com.

“While some speculators are waiting to get onboard after the US jobs report is out of the way, some of the more technically-minded traders are probably waiting for that $1,240 resistance level to give way,” he said.

Gold, which is considered a safe investment during times of financial, economic and geopolitical uncertainty, has recovered about 7% from 19-month lows hit in mid-August.

“With increased volatility and geopolitical risk, macro asset allocation is becoming more gold-positive again while we believe much of the dollar’s upward move is now behind us with rate hike expectations dropping,” analysts at BMO Capital Markets said in a note.

Meanwhile, spot palladium drifted further away from an all-time high of $1,263.56 hit this week.

The metal was down 0.3% at $1,206.24 an ounce, having fallen 2.7% in the previous session, but set to post its second straight weekly gain.

Silver gained 0.3% to $14.51 an ounce and was headed for a more than 2% weekly rise.

Platinum rose 0.3% to $789.30, but extended losses for a fifth successive week. 

Reuters