Bengaluru — Gold eased on Friday as investors booked profits after prices raced past $1,450 an ounce to hit a six-year peak, but Middle East tensions and prospects for lower interest rates kept bullion on track for a second week of gains.
Spot gold shed 0.6% to $1,437.51 by 11.51am GMT, having touched its highest since early May 2013 at $1,452.60. However, US gold futures hung on to gains, advancing by about 0.8% to $1,438.80.
“What we have seen over the past couple of hours is a natural bit of profit-taking with gold having made this big move higher. Investors are holding their breath going into the end of the week and the seasonally slow summer period,” said Mitsubishi analyst Jonathan Butler.
“However, gold is still looking good. The interest rates and dollar environment, uncertainties over the US-China trade war and now the geopolitical situation being the icing on the cake; all of this has created a very supportive environment for gold.”
In a speech interpreted as a strong argument in favour of quick monetary action, New York Fed president John Williams said on Thursday that policy makers could not wait for economic disaster to hit before adding stimulus.
The dollar recovered after a sharp fall triggered by the speech, latching on to a subsequent statement from a New York Fed representative that Williams’s comments were academic and not about immediate policy direction.
Expectations that the US Federal Reserve will cut interest rates by at least 25 basis points (bps) at its policy meeting over July 30-31 have fueled gold’s momentum.
“Now that bullion has broken through $1,440, the figure will be the key for further gains, as targets extend toward $1,500,” industrial and trading services group MKS PAMP said in a note.
Investors also took stock of developments in the Middle East, with the US saying its navy had destroyed an Iranian drone in the Strait of Hormuz. Iran, meanwhile, said all its drones had returned to base safely and there was no sign of major escalation in the Gulf.
Gold is considered a safe investment during times of political or economic uncertainty, with global growth concerns also playing on investors’ minds recently.
Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 1.4% to 814.62 tonnes on Thursday from 803.18 tonnes the previous day.
Among other precious metals, platinum gained 1% to $857.73 while palladium gained 0.2% to $1,528.29. Silver slipped 0.2% to $16.30 and was on track for its best week since July 2016, having gained nearly 7%.