Gold rises to two-week high as dollar stumbles
· Gold prices rose on Tuesday to their highest level in nearly two weeks, as the dollar slipped to multi-year lows on bets that U.S. interest rates would stay lower for a longer period after the Federal Reserve’s new policy framework.
· Spot gold was up 0.7% at $1,983.77 per ounce by 0041 GMT, after hitting its highest since August 19 at $1,984.97 earlier in the session. U.S. gold futures rose 0.6% to $1,990.
· “With the greenback expected to remain week, we expect gold to grind higher and revisit the $2,000 an ounce level initially,” said Jeffrey Halley, a senior market analyst at OANDA.
· The dollar index dropped to a more than two-year low against its rivals, making gold cheaper for holders of other currencies.
· The Fed’s new monetary policy strategy, which could result in inflation moving slightly higher and interest rates staying lower for longer, has triggered a sell-off in the dollar, driving inflows into safe-haven bullion.
· The U.S. central bank’s new approach to monetary policy means a low unemployment rate on its own doesn’t warrant higher interest rates, Fed Vice Chair Richard Clarida said on Monday.
· “Expectations of lower for longer when it comes to U.S. interest rates and continued weakness in the USD index are setting a favorable environment for precious metals, especially gold,” ING analyst Warren Patterson said in a note.
· Low interest rates reduce the opportunity cost of holding non-yielding bullion, which is also used as a hedge against inflation and currency depreciation.
· The United States said on Monday it was establishing a new bilateral economic dialogue with Taiwan, a decision that could worsen relation between Washington and Beijing as China claims Taiwan as its own territory.
· Elsewhere, silver jumped 1.3% to $28.59 per ounce, its highest since August 11.
· Platinum rose 0.9% to $938.37, and palladium climbed 0.7% to $2,259.57.
Reference: CNBC
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