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Gold climbs as investors weigh Fed rates, pause in China buying

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Gold increased as investors weighed China's move to pause gold purchases for the first time in 11 months against diminishing odds for a Federal Reserve interest-rate increase this year, which helped push the US dollar to a one-month low.

[SINGAPORE] Gold increased as investors weighed China's move to pause gold purchases for the first time in 11 months against diminishing odds for a Federal Reserve interest-rate increase this year, which helped push the US dollar to a one-month low.

Bullion for immediate delivery climbed as much as 0.4 per cent to US$1,248.31 an ounce and traded at US$1,247.86 at 10:52 am in Singapore, according to Bloomberg generic pricing.

The metal has moved less than US$4 from the close on Friday when prices surged 2.7 per cent after a report that the US created the fewest jobs in almost six years, reducing expectations for a rise in borrowing costs.

Traders now see no chance of a rate hike at the Fed's June 14-15 meeting, down from odds of 24 per cent at the end of last month, with the probability of a move in July and September coming in at 18 per cent and 39 per cent, futures contracts indicate.

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Market voices on:

The People's Bank of China left gold reserves at the same level as in April, prompting concern that physical demand may be weakening. A gauge of the US dollar fell to the lowest level since May 6.

"Until the Fed makes a decision next week, we don't expect much movement in gold," Brian Lan, managing director of Singapore-based GoldSilver Central Pte, said by e-mail.

Investors will continue to monitor China's gold reserves to see if the break from buying was a one-off occurrence, but the pause may provide a signal that physical demand is slowing, Mr Lan said.

Gold probably has bottomed and will be supported by the abundance of risk in the coming months from a potential British exit from the European Union and US monetary policy to Spanish and US elections, according to Clive Burstow, who helps manage US$35 billion at Baring Asset Management Ltd in London.

BLOOMBERG

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