Gold benefits from dovish US Fed and softer dollar

Bengaluru — Gold climbed to a more than one-week high on Thursday after US Federal Reserve chair Jerome Powell struck a dovish tone, indicating much remains to be done before policy tightening begins, while a softer dollar lent further support to the metal.

Spot gold rose 0.5% to $1,815.36/oz by 3.22am GMT, having earlier hit a peak since July 20 at $1,817.35.

US gold futures climbed 0.9% to $1,815.00.

“Investors are buying into the dynamic that the Federal Reserve has opened up for gold. They have talked down the risks of a rate hike and tapering a little bit, and that gives gold prospects to drift higher in the short term,” said Kyle Rhoda, an analyst at IG Market.

“The next key level of resistance will be in the range of $1,830-$1,840.”

Powell said the US job market still had “some ground to cover” before it would be time to pull back support and that it was “ways away” from considering interest rate hikes.

Lower interest rates reduce the opportunity cost of holding non-yielding bullion.

Investors will now turn their attention to the US weekly jobless claims data due at 12.30pm GMT.

Powell’s remarks sent the US dollar index to a more than two-week low. A weaker dollar makes gold cheaper for holders of other currencies.

US treasury yields also fell after the Fed gave no details on when it is likely to reduce bond purchases.

“Rising monetary policy uncertainty, inflation and increasing risk of equity market volatility should favour demand for safe-haven assets,” ANZ Research said in a note.

It said central banks had increased gold purchases in recent months, offsetting physical demand losses in the second quarter.

Elsewhere, silver gained 1.09% to $25.20/oz, platinum rose 0.9% to $1,073.66, and palladium was up 0.5% at $2,639.65. 

Reuters