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Gold scales near six-year peak on dovish Federal Reserve signals

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Gold prices climbed to a near six-year high on Friday after the US Federal Reserve indicated earlier this week that it could cut interest rates as early as July, prompting a sharp fall in the dollar and US Treasury yields.

[BENGALURU] Gold prices climbed to a near six-year high on Friday after the US Federal Reserve indicated earlier this week that it could cut interest rates as early as July, prompting a sharp fall in the dollar and US Treasury yields.

Spot gold was up 0.4 per cent at US$1,392.81 per ounce as of 0128 GMT, after hitting its highest since Sept 5, 2013 at US$1,395.13.

It was up 4.1 per cent for the week, heading for its biggest weekly gain since the week ended April 29, 2016.

US gold futures rose 0.1 per cent to US$1,398.10 an ounce.

The Fed said on Wednesday it was ready to battle growing global and domestic economic risks with interest rate cuts beginning as early as next month, as it took stock of rising trade tensions and growing concerns about weak inflation.

The Bank of Japan kept monetary policy steady but Governor Haruhiko Kuroda signalled readiness to ramp up stimulus as global risks cloud the economic outlook, joining US and European central banks in dropping hints of additional easing.

Bank of England officials voted unanimously to hold interest rates despite some recent suggestions from policymakers that borrowing costs should go up. The BoE cut its economic growth forecast for Britain to zero in the second quarter.

US benchmark 10-year Treasury yields on Thursday dropped below 2 per cent for the first time in more than 2-1/2 years, while other maturities fell to multi-year lows as well, a day after the Fed flagged interest rate cuts as early as next month.

The dollar struggled to get on the front foot on Friday, and was poised for a weekly loss against major currencies after the Fed joined global peers with plans to cut interest rates to support flagging economic growth.

Asian stocks struggled on Friday to track Wall Street's exuberance about a possible US rate cut next month as anxiety over Sino-US trade negotiations clouded the investor mood in the region.

US President Donald Trump played down Iran's downing of a US military surveillance drone on Thursday, saying he suspected it was shot by mistake and "it would have made a big difference" to him had the remotely controlled aircraft been piloted.

Focus now shifts to next week's G-20 meeting for any developments between the United States and China regarding their trade war that has raised concerns about global growth.

Russia's gold reserves stood at 70.4 million troy ounces as of the start of June, the central bank said on Thursday.

REUTERS