Gold prices recover from two-month low as US dollar rally stalls

[BENGALURU] Gold prices climbed on Thursday (Oct 8) as the US dollar eased from an 18-month peak, helping bullion recover from a two-month low, while traders weighed the prospect of another US Federal Reserve rate hike this year.

Spot gold was up 0.7 per cent at US$4,141.09 per ounce by 0140 GMT. On Wednesday, bullion prices touched their lowest level since Aug 5 as a firmer dollar and higher US Treasury yields weighed on the market.

US gold futures for December delivery gained 0.6 per cent to US$4,165.10.

The pullback in the US dollar makes greenback-denominated gold less expensive for holders of other currencies.

“The short-term investment case for gold remains challenged... We would need to see a break above US$4,275 to become more constructive on the near-term upside,” said Chris Weston, head of research at Pepperstone.

“If markets begin treating rising long-end yields as a reflection of sovereign credit and fiscal risk rather than stronger economic fundamentals, gold could start to diverge positively from bond yields and the debasement trade could return with greater force.”

Fed policymakers were divided last month over the rationale for raising interest rates, with “some participants” seeing a hike as needed to keep the impact of energy and other price shocks at bay, but a more hawkish core viewing it as necessary to guard against emerging demand-driven inflation, minutes showed.

Traders see only an 18 per cent chance of a rate hike later this month, but are pricing in an 80 per cent likelihood of an increase in December, according to CME’s FedWatch tool.

Higher rates diminish the appeal of non-yielding gold.

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Among other metals, spot silver steadied at US$60.18, platinum added 2.1 per cent to US$1,665.00 and palladium climbed 1.6 per cent to US$1,142.86. REUTERS