Gold surged 3% to its highest price in more than two and a half months on Wednesday as a drop in the U.S. dollar and bond yields boosted the appeal of non-yielding bullion ahead of the release of the minutes from the Federal Reserve’s July 28-29 policy meeting.
Spot gold was up 2.7% to $4,448.97 per ounce by 9:37 a.m. EDT (1337 GMT) after touching its highest level since June 5 at $4,466.01 earlier in the session. U.S. gold futures increased nearly 2% to $4,506.70.
On the technical front, spot gold broke above its 100-day
moving average of around $4,381.
“We’ve seen the odds of a Fed raising interest rates at the
September meeting drop dramatically over the course of the last
several sessions. As a result, that has been putting pressure on
the dollar and supporting the gold market,” said David Meger,
director of metals trading at High Ridge Futures.
The U.S. dollar index fell 0.6%, making dollar-priced
gold less expensive for holders of other currencies and boosting
the precious metal’s appeal. Yields on 30-year U.S. Treasuries
fell sharply on Wednesday from around their highest level in 19
years.
TD Securities said in a note the U.S. Treasury’s announcement
that it is increasing the size of liquidity support buyback
operations has given metals a “jolt of life.”
“While the fierce bid has faded in recent days, the flows
could quickly return amid Treasury liquidity support, a Fed
willing to look through an energy shock, and a growing
stagflation narrative, which should all ultimately see lower
real rates,” the TD Securities note said.
Expectations that the Fed will hold rates steady at its
September 15-16 meeting stand at 65%, according to CME Group’s
FedWatch Tool, after recent weak U.S. economic data dampened
bets for a hike.
Among other metals, spot silver rallied 2.7% to
$65.01 per ounce, platinum edged up 3.2% to $1,766.55 and
palladium advanced 2.3% to $1,319.03.
Source: Khaleej Times