Gold hits near two-week high on softer dollar

[BENGALURU] Gold prices hit a near two-week peak on Monday, as a weaker dollar offset bets that the US Federal Reserve could begin tapering its pandemic-era asset purchases soon.

Spot gold rose 0.2 per cent to US$1,764.60 per ounce by 1.12am GMT, after hitting US$1,765.54, its highest since Sept 23. US gold futures gained 0.4 per cent to US$1,764.90.

The dollar index, dropped to its lowest since Sept 29, making gold cheaper for buyers holding other currencies.

The US Federal Reserve may be close to meeting the inflation mandate set for raising interest rates, Philadelphia Fed Bank president Patrick Harker said, but it may be a year or longer before the central bank's employment goal is met to allow for an actual rate increase.

The Fed's conditions for raising interest rates could be met by the end-2022, Cleveland Fed Bank president Loretta Mester said on Friday, adding, she expects inflation to come back down to the central bank's target next year.

Gold is traditionally seen as an inflation hedge, although reduced central bank stimulus and interest rate hikes tend to push government bond yields up, in turn translating into a higher opportunity cost for gold that pays no interest.

SPDR Gold Trust GLD, the world's largest gold-backed exchange-traded fund, said its holdings slipped 0.4 per cent to 986.54 tonnes on Friday.

Demand for physical gold also picked up in top consumer China last week and there was increased activity in other Asian hubs including Singapore.

Speculators cut net long positions by 19,471 contracts to 42,123 in the week to Sept 28, data from the US Commodity Futures Trading Commission (CFTC) showed on Friday.

Silver was up 0.4 per cent at US$22.62 per ounce.

Platinum rose 0.4 per cent to US$976.08 and palladium edged 0.1 per cent up to US$1,921.72.

REUTERS