AMSTERDAM/LONDON: A dollar retreat and soothing words from Fed chair Jerome Powell lifted gold prices on Wednesday, allowing them to move further away from the seven-week lows hit at the end of last week.
Spot gold rose 0.8% to $1,792.54 per ounce by 10:42 am EDT (1442 GMT) and US gold futures were up 0.9% at $1,793.40.
Powell said on Tuesday that inflation would not be the only determinant of interest rate decisions, calming investors worried about policy tightening following last week’s hawkish turn by the US Federal Reserve.
The softer dollar, down 0.2%, also helped to reduce gold’s cost for holders of other currencies. Markets broadly shrugged off US PMI data that showed factory activity at a record high in June.
Still, the precious metal has failed to reverse last week’s 6% drop as expectations of Fed policy tightening have taken hold in markets. Higher interest rates translate into a reduced opportunity cost of holding bullion, which pays no interest.
But David Meger, director of metals trading at High Ridge Futures, said it was not a foregone conclusion the Fed would move on interest rates and asset purchases as quickly as last week’s meeting had appeared to suggest.
“We’re clearly trading in a very accommodative environment that will underpin gold prices (and) overall it’s still too early to start making mention of reduction in asset purchases and increases in interest rates,” Meger said.
Technicals were supportive too, Quantitative Commodity Research analyst Peter Fertig said, noting gold appeared to have stabilised, having bottomed out from last week’s selloff.
Elsewhere, silver rose 1.8% to $26.22 per ounce and palladium climbed 2.5% to $2,620.38. Platinum was up 0.9% at $1,088.50.
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