GOLD prices gained more than 1 per cent on Friday (Aug 23) as the dollar and Treasury yields retreated following comments from Federal Reserve chair Jerome Powell that signalled an interest rate cut in September.
Spot gold rose 1.2 per cent to US$2,512.63 per ounce by 1.44 pm eastern time (1744 GMT), but was off a record high of US$2,531.60 hit on Tuesday. US gold futures settled 1.2 per cent higher at US$2,546.30.
Powell said “the time has come” for the US central bank to cut interest rates and that inflation was nearing the Fed’s 2 per cent target, offering an explicit endorsement of an imminent policy easing.
The dollar index fell 0.8 per cent against its rivals, while benchmark US 10-year yields also declined following Powell’s speech, making gold more attractive for other currency holders.
“Asset markets are reacting well, at least initially, to Powell’s general, but somewhat open-ended comment that it’s time for policy to adjust,” said Tai Wong, a New York-based independent metals trader.
“Gold will continue to grind higher ahead of the September Fed meeting and the updated dot plot which will indicate how many likely cuts this year.”
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Lower US interest rates also generally increase the relative appeal of zero-yield bullion.
Gold might be over-positioned to the long end and we could see sell offs and some profit-taking, said Bart Melek, head of commodity strategies at TD Securities.
“But longer term, gold should do well since the Fed is very much picking their game and trying to make sure employment doesn’t weaken anymore and is not worried about inflation.”
Traders are expecting a 59.5 per cent chance of a 25 basis point (bps) cut in September, while 40.5 per cent expect a deeper 50 bps reduction.
Silver rose 2.9 per cent to US$29.83 per ounce and was up nearly 2.7 per cent for the week.
India’s silver imports are on course to nearly double this year due to rising demand from solar panel and electronics makers, leading importers said.
Platinum gained 1.8 per cent to US$961.01 and palladium was up 2.6 per cent at US$956.69. REUTERS
