Gold hits near two-week high on greenback weakness, dovish Fed

[BENGALURU] Gold prices climbed to their highest level in nearly two weeks on Monday, as the US dollar (USD) weakened and the US Federal Reserve's new policy framework suggested that interest rates would remain low for some time.

Spot gold was up 0.2 per cent at US$1,969.03 per ounce by 0505 GMT, after hitting its highest since Aug 19 at US$1,976.14 in early Asian trade. However, gold was down 0.2 per cent so far this month.

US gold futures rose 0.1 per cent to US$1,976.80.

"The greenback took a big spill on Friday as market participants digested what was coming out of the Jackson Hole Symposium, and the knock-on benefits to gold are still being felt," said IG Markets analyst Kyle Rodda.

"With the USD's trend still looking skewed to the downside, a continuation of that trend might be what it takes to drive another lift in the upside momentum for gold."

The Fed's new monetary policy strategy suggested that the US central bank's key overnight interest rate, already near zero, would stay there for potentially years to come as policymakers woo higher inflation.

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Lower US interest rates put pressure on the US dollar and bond yields, increasing the appeal of non-yielding bullion.

The dollar index dropped close to a two-year low and was on track for its fourth consecutive monthly decline.

Gold has gained nearly 30 per cent so far this year, notching an all-time high of US$2,072.50 earlier this month, as investors seek to buy the metal as a hedge against possible inflation and currency debasement due to unprecedented money printing by central banks.

"Gold is expected to retest the old highs again. I don't think anything has changed in terms of the underlined fundamentals," said Edward Meir, an analyst at ED&F Man Capital Markets.

Elsewhere, silver jumped 1.7 per cent to US$27.96 per ounce and was heading for its fifth straight monthly gain, up nearly 15 per cent.

Platinum rose 0.3 per cent to US$933.49 and palladium gained 0.6 per cent to US$2,218.46.

REUTERS