Gold holds near one-week high after Fed rate increase delay

[SINGAPORE] Gold held near the highest level in a week after bets shrank for a US rate rise this year, boosting the outlook for the metal which doesn't pay interest or give returns like other assets such as bonds and equities.

Bullion for immediate delivery was at US$1,136.50 an ounce at 10:55 am in Singapore from US$1,135.75 on Oct 5, according to Bloomberg generic pricing. Prices rose to US$1,142.07 in intraday trading on Monday, the highest since Sept 28.

The probability that the Federal Reserve will tighten monetary policy this month has dropped to 10 per cent, suppressing the dollar while bolstering assets in emerging and riskier markets that have benefited from the era of cheaper money. Mohamed A. El-Erian, a Bloomberg View columnist and the chief economic adviser at Allianz SE, said the odds of a Fed liftoff are 50 per cent for the following session Dec 15-16, while analysts at Societe Generale SA said Federal Open Market Committee officials won't move until March. The Fed releases the September FOMC meeting minutes on Thursday.

"Investors are likely to look for guidance for the directions in short-term gold price movements in the FOMC minutes to be released this week, with any indication from the Fed to signal a potential delay in the liftoff likely to be supportive of prices," Vyanne Lai, an economist at National Australia Bank in Melbourne, said by e-mail on Tuesday. "That said, our outlook for the US economy has not changed fundamentally as a result of recent events and we continue to place a high probability on the first rate hike to take place in December." Silver lost 0.2 per cent to US$15.63 an ounce after surging to US$15.7304 on Monday, the highest price since July 13. Palladium fell 0.6 per cent to US$688.30 an ounce after rising to US$712.90 on Oct 5, the highest since June 19.

BLOOMBERG