Gold dips as Fed move to hold US rates adds to uncertainty
[SINGAPORE] Gold dropped from a two-week high on Friday, giving back some of the sharp gains from the last two days, as the Federal Reserve's decision to hold US interest rates steady this week added to uncertainty over the timing of an eventual rate hike.
Spot gold fell 0.3 per cent to US$1,127.80 an ounce at 0346 GMT, after climbing to a two-week high of US$1,133.20 in the previous session. Still, the metal was on track to snap a three-week losing streak with a near 2-per cent gain.
The Fed kept interest rates unchanged on Thursday, in a bow to worries about the global economy, financial market volatility and sluggish inflation at home. But the US central bank maintained its bias towards a rate hike sometime this year.
Gold had been weighed down all year on uncertainty over when the Fed would hike interest rates from record-lows. Higher rates could dent demand for non-interest paying bullion, while boosting the dollar.
Weakness in the dollar and stock markets could prompt a rally in gold prices in the near term but the gains are unlikely to last, said INTL FCStone analyst Edward Meir.
"Because the Fed has made clear that it intends to raise rates by year-end, the markets will eventually start bidding the dollar higher and we could see gold's up move to be relatively short-lived," he said.
The Fed on Thursday also forecast inflation would creep only slowly toward its 2 per cent target, which one bullion trader said was a negative for gold, often seen as an inflation-hedge.
The Fed is due to hold two more policy meets this year, in October and December.
A majority of Wall Street's top banks now expect the Fed to begin hiking rates in December, according to a Reuters poll conducted on Thursday.
The dollar nursed losses on Friday after slumping to a three-week low against a basket of major currencies in the previous session.
Physical demand from Asia wasn't offering much support to gold prices.
Gold discounts in India, the world's second-biggest consumer, widened this week as dealers struggled to offload stocks amid sluggish demand.
Chinese premiums held steady at US$5-$6 despite the overnight jump in prices, but failed to boost global prices.
REUTERS
BT is now on Telegram!
For daily updates on weekdays and specially selected content for the weekend. Subscribe to t.me/BizTimes
Energy & Commodities
BHP’s biggest rivals sit on the sidelines of Anglo M&A drama
ExxonMobil to take 18 to 24 months to hit full stride with Pioneer purchase
Oil settles down on US jobs data, steepest weekly loss in three months
Glencore Group nears deal for Shell’s Singapore oil refinery
Opec+ may need to tackle oil capacity conundrum next month
Gold flat ahead of US payrolls data, set for second weekly drop