Gold climbs to highest in seven weeks as Fed rate view weighed

[SINGAPORE] Gold advanced to the highest in seven weeks as investors assessed the odds for a Federal Reserve interest- rate increase this year, with Barclays Plc saying a split among policy makers meant a rise was unlikely.

Spot bullion gained as much as 0.9 per cent to US$1,166.80 an ounce, the highest since Aug 24, and was at US$1,164.75 by 5:06 pm in Singapore, Bloomberg generic pricing shows. Prices were up 1.6 per cent last week.

Gold's climbed for three of the past four weeks, rebounding from a five-year low in July, amid speculation that the Fed may refrain from tightening until next year. The chances of a rate liftoff in 2015 are below 40 per cent, futures data show. Fed Vice Chairman Stanley Fischer said on Sunday the U.S. economy may be strong enough to merit an increase by year-end, while cautioning that policy makers are monitoring slower job growth and international developments to decide the timing.

"Markets are continuing to price in doubt about a Fed rate hike in December despite Vice Chairman Fischer's weekend comments," Ric Spooner, a chief analyst at CMC Markets in Sydney, said by e-mail. "A significant test looms for gold in the shape of resistance formed by the August high at US$1,170 and the 200-day moving average around US$1,177. It's likely to take a real change of heart on the Fed to push prices clearly through this resistance."

Minutes from the Fed's meeting in September released Thursday revealed that policy makers were divided, which means they are unlikely to raise rates this year, according to Barclays. The first increase will be in March, analysts Feifei Li and Nikolaos Sgouropoulos, wrote in a report on Monday. Fed fund futures show a 62 per cent probability for a move in March.

Bullion of 99.99 per cent purity climbed as much as 1.3 per cent to 237.78 yuan a gram on the Shanghai Gold Exchange, the highest level since Sept 17, and was at 237.20 yuan. Silver for immediate delivery increased 1 per cent to $15.9920 an ounce. Spot platinum rose 0.7 per cent, while palladium was little changed.

BLOOMBERG