Gold & Silver

Gold prices rise by most in a month as US dollar declines

Reuters Bengaluru | Updated on January 16, 2018 Published on December 29, 2016


Gold prices rose to their highest in two weeks on Thursday, as the US dollar fell, but the gains were limited on expectations of more rate hikes by the US Federal Reserve next year.

Spot gold was up 0.5 per cent at $1,147.56 an ounce by 0631 GMT, after reaching its highest since December 14 at $1,149.84 earlier in the session. The metal was also on track for its biggest one-day rise since November 28.

US gold futures were up 0.7 per cent at $1,148.50 per ounce.

“I think it's because of the dollar, which has weakened a little bit,” said Helen Lau, an analyst at Argonaut Securities in Hong Kong.

The dollar index, which measures the greenback against a basket of currencies, eased about 0.4 per cent to 102.910.

The dollar sagged against the yen on Thursday, weighed down by US yields slipping to two-week lows and an ebb in risk appetite that favoured the safe-haven Japanese currency.

Gold was poised to end the year up after three straight annual declines. Bullion has risen over 8 per cent so far this year despite an 8 per cent drop in November.

“With interest rates rising in the US, gold will be a less attractive investment, and this explains some of the weakness the commodity has been facing in the recent months,” said Mihir Kapadia, CEO of London-based Sun Global Investments Ltd.

The Federal Reserve had raised US interest rates earlier this month for the first time in a year and signalled three more increases next year from the previous projection of two.

Gold is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar, in which it is priced.

“Trading conditions should remain fairly uneventful for the balance of the week,” INTL FCStone analyst Edward Meir said in a note.

"But heading into next week, we think the Italian bank rescue and the direction of the Chinese yuan will likely dictate near-term pricing in gold, especially if equity markets start to get nervous about either of these two developments.”

Shanghai Gold Exchange, the world's biggest physical bullion exchange, said on Wednesday it will curb the amount of gold investors can trade at one time, a move analysts said would limit institutional investors' influence on prices.

Among other precious metals, silver rose for a third straight session, up 0.7 per cent at $16.12 an ounce. Platinum was up 0.9 per cent at $905.20, while palladium gained 1.1 per cent at $672.70 an ounce.

Published on December 29, 2016
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