NEW YORK: Gold climbed almost 2percent from a near-six-week low on Thursday, as investors reassessed their positions after the Federal Reserve’s first rate hike in three years, and the US dollar and oil prices eased.
Spot gold was up 1.8percent at USD4,339.53 per ounce, as of 1154 GMT, after hitting USD4,234.65, the lowest since August 7, on Wednesday. US gold futures for December delivery were down 0.2percent to USD4,379.30. “I suspect the market may have gotten itself over-positioned on the expectation of a rate hike, as the likelihood grew. And now that it’s happened, those positions are being squared out,” independent analyst Ross Norman said.
The dollar eased from a seven-week high, making greenback-priced bullion more affordable for holders of other currencies, while oil prices extended their fall on diminishing fears of supply disruptions. The Fed raised rates on Wednesday and flagged more hikes in the coming months, with chief Kevin Warsh joining a unanimous decision that effectively acknowledges the Trump administration’s inability so far to control inflation that policymakers worry could worsen. Although gold is considered an inflation hedge, a high-interest-rate environment reduces its appeal by boosting the attractiveness of interest-bearing assets.
In Britain, the Bank of England kept rates on hold on Thursday, while the Bank of Japan could raise interest rates to a 31-year high on Friday.
“The Fed is tightening policy at a time when inflation is being driven primarily by energy prices and supply shocks, meaning higher interest rates could weaken growth without quickly resolving all price pressures,” said Linh Tran, market analyst at XS.com. “This environment remains supportive of demand for gold as a hedge, particularly while geopolitical uncertainty persists.” On the geopolitical front, US President Donald Trump said he hoped an end to the war against Iran was near, as the conflict escalated with Saudi aircraft pounding Yemen and Houthi fighters launching drones and missiles at Saudi cities.
Spot silver rose 2.2percent to USD64.32 per ounce, platinum gained 1.9percent to USD1,784.23 and palladium climbed 1.6percent to USD1,289.95.
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