Tags: gold | dollar | Fed | rates

Gold Rises to Seven-Week High on Weak Dollar, Likely Rate Delay

Monday, 12 October 2015 04:08 PM

Gold advanced to the highest in seven weeks, boosted as investor confidence in the dollar waivered amid doubts U.S. interest rates will rise this year.

Bullion rose in three of the past four weeks, rebounding from a five-year low in July, on speculation that the Federal Reserve will refrain from tightening monetary policy until next year. The chances of a rate liftoff in December fell to 39 percent on Monday, from 59 percent a month earlier, futures data show. While Fed Vice Chairman Stanley Fischer said on Sunday the U.S. economy may be strong enough to merit an increase by year- end, dollar investors shrugged off his comments as a gauge of the U.S. currency touched a three-week low.

Gold prices “tend to reflect investors attitude toward monetary uncertainty and current or future central bank actions, primarily those of the Federal Reserve,” Michael Cuggino, a San Francisco-based fund manager at Pacific Heights Asset Management LLC, said in a telephone interview. “For most investors, having a little healthy investment in gold as part of a diversified strategy is good.”

Gold futures for December delivery gained 0.7 percent to settle at $1,164.50 an ounce at 1:53 p.m. in New York, after reaching $1,168.60, the highest since Aug. 24.

In the week ended Oct. 6, money managers increased their net-long position in gold, silver, platinum and palladium for a third straight week, helping to fuel rallies for the metals amid signs of a flagging U.S. labor market, a drop in German factory orders and a forecast by the International Monetary Fund for slower global expansion. That same week, hedge funds and other money managers cut net bullish bets on the dollar to the least since September 2014, according to data from the Commodity Futures Trading Commission in Washington.

“You have the lower interest rates and you have the dollar story,” Georgette Boele, a strategist at ABN Amro Bank NV in Amsterdam, said by phone. “They have a double impact because lower interest rates are usually supportive for precious metals and at the same time the weaker dollar is as well.”

Minutes from the Fed’s meeting in September released Thursday revealed that policy makers were divided, which means they are unlikely to raise rates this year, according to Barclays Plc. The first increase will be in March, analysts Feifei Li and Nikolaos Sgouropoulos wrote in a report on Monday. Fed-fund futures show a 61 percent probability for a move in March.

Silver futures also gained on the Comex. Platinum futures advanced on the New York Mercantile Exchange, while palladium fell.

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Gold advanced to the highest in seven weeks, boosted as investor confidence in the dollar waivered amid doubts U.S. interest rates will rise this year.
gold, dollar, Fed, rates
Monday, 12 October 2015 04:08 PM
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