Gold rose to a two-week high on Thursday after the U.S. Federal Reserve's decision to keep interest rates on hold sent the dollar to its lowest level since the start of last week.
Gold and silver markets saw good follow-through buying interest Thursday, following solid gains Wednesday that came in the aftermath of central bank meetings in Japan and the U.S. that were deemed dovish on their monetary policies. December Comex gold was last up $13.20 an ounce at $1,344.60. December Comex silver was last up $0.307 at $20.075 an ounce.
Gold started the day off very strongly, spot rising to 1344 in intraday trading, but lost some of that momentum, pressured a bit by equities and some profit taking over the two-day rally we are experiencing. Gold will close around the 1337 level. Silver followed a similar pattern and is fixed to end the day up about a third of a percent. The gray metal is showing unexpected resilience.
Gold was boosted Wednesday by the Federal Reserve’s decision to once again leave interest rates steady, yet the rally now could be curbed by a case for higher rates after division among Fed policymakers, says HSBC. Analysts point out that gold ran up early Wednesday on expectations the Fed would leave rates unchanged, then gained further when rates were in fact left on hold. “We have made the point (previously) that the longer the Fed holds off on rate gains, the better for gold,” HSBC says. “The gains running up to and shortly after the Fed decision reaffirm this view.” However, the bank continues, three of the 10 Fed members dissented on the vote, favoring a hike now. Also, Fed Chair Janet Yellen said the case for a rate hike has strengthened. “To the extent that this comment brings forward the timing of a rate rise, it is a clear negative for gold,” HSBC says. “On balance, the rate decision is near term gold-bullish but the divisions at the FOMC and Ms. Yellen’s press conference leave gold in a sort of a monetary no-man’s land.” HSBC economists issued a report expressing doubt that the Fed will even hike in December, and rates overall remain low and monetary policy accommodative. Still, HSBC adds, “the clear increase in the likelihood of a Fed rate hike and divisions at the Fed will likely cap gold’s upside, in our view.”
Reference: KITCO, Reuters
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