LONDON: Gold prices gained on Thursday as US Treasury yields eased after the Federal Reserve announced a widely anticipated tapering of its monthly bond purchases and indicated it would be patient on raising interest rates.
Spot gold rose 0.5% to $1,777.40 per ounce by 1036 GMT after tumbling to a three-week low on Wednesday. US gold futures for December delivery climbed 0.8% to $1,777.20 per ounce.
The Fed stuck with its contention that high inflation would be transitory and not likely to lead to a faster rise in interest rates.
“The Fed was a nothing burger event, in other words it wasn’t all that interesting. We’d have liked to see gold significantly out of its trading range after the Fed instead we ended Wednesday just a shade lower than we were pre-announcement,” said independent analyst Ross Norman.
Ultra-loose US monetary policy has helped drive gold sharply higher since the financial crisis of the late 2000s, with low interest rates cutting the opportunity cost of holding non-yielding assets and inflation fears stoking demand for a hedge.
Boosting gold’s appeal, yields on the benchmark 10-year US Treasury yields eased after climbing to a session high of 1.602% on Wednesday.
Reduced stimulus and interest rate hikes tend to push government bond yields up, raising the opportunity cost of gold, which pays no interest.
Norman also pointed out that strong physical demand for gold was supporting markets, as South Asia’s Diwali festival generally boosts demand for the precious metal. Focus now shifts to Friday’s key US nonfarm payrolls report and the Bank of England’s policy decision at 1200 GMT on Thursday, where it is expected to increase interest rates.
Elsewhere, spot silver gained 0.6% at $23.64 per ounce. Platinum rose 1.5% to $1,043.75 per ounce and palladium jumped 2.5% to $2,048.72 per ounce.
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