Gold hits 2-week high as Fed rate hike guidance weighs on US dollar

[BENGALURU] Gold prices hit a two-week high on Monday as the US dollar held near five-week lows reached in the previous session, finding support from the US Federal Reserve's conservative guidance on the path of rate hikes this year.

Spot gold rose 0.4 per cent to US$1,233.60 per ounce by 0310 GMT, after earlier touching US$1,234.60 an ounce, its highest since March 6.

US gold futures gained 0.3 per cent to US$1,233.90.

The US dollar index, which measures the greenback against a basket of currencies, was down 0.1 per cent at 100.160, holding near Friday's lows.

"The dollar is weaker across the board in Asia and also against the euro. It's pushing gold higher... a pure technical buying," a Hong Kong-based precious metals trader said.

"The market was geared for a hawkish FOMC and the Fed was really dovish. There was a lot of short-covering. People are now putting gold back on the plate and are more comfortable."

Spot gold is expected to test a resistance at US$1,237 per ounce, a break above which could lead to a gain to US$1,243, according to Reuters technical analyst Wang Tao.

Markets are also bracing for a packed week of Fed messaging with no less than nine different policy makers set to speak, including Chair Janet Yellen on Thursday.

Ms Yellen's cautious guidance last week has investors pricing in almost no chance of another rate rise at the next policy meeting in May, rising to around 50-50 for June.

Since the policy decision to boost rates on Wednesday, gold prices have rebounded more than US$35 as the US dollar plumbed five-week lows after Ms Yellen's signal of a slower pace of rate increases this year disappointed US dollar bulls.

"With concerns of a more hawkish Fed now easing, the outlook for gold looks a little bit more positive," ANZ analysts said in a note on Monday.

Hedge funds and money managers had slashed net long positions in Comex gold for the second straight week in the week to March 14.

Money managers cut their net long position in bullion by 44,058 lots to 49,835 lots, the lowest since early January.

During that week, prices dropped about 1.5 per cent on firm expectations that the Federal Reserve would hike US interest rates in March and as the US dollar strengthened.

Holdings of SPDR Gold, the world's largest gold-backed exchange-traded fund, fell 0.35 per cent to 834.10 tonnes on Friday.

Spot silver rose 0.4 per cent on to US$17.39 per ounce on Monday. Platinum was up 0.5 per cent to US$962.50, while palladium rose 0.4 per cent to US$775.50.

REUTERS