Gold bars are seen at the Kazakhstan's National Bank vault in Almaty, Kazakhstan. File Picture: REUTERS/MARIYA GORDEYEVA
Gold bars are seen at the Kazakhstan's National Bank vault in Almaty, Kazakhstan. File Picture: REUTERS/MARIYA GORDEYEVA

London — Gold rose on Friday and was on course for its first weekly gain since February as this week’s cautious message on interest rates from the US Federal Reserve left the dollar at five-week lows, making bullion cheaper for holders of other currencies.

The Fed raised US rates on Wednesday, as expected, but its earlier forecast of three rate increases this year remained unchanged, disappointing some investors who had hoped for hints of a possible fourth hike in 2017.

Spot gold was up 0.3% at $1,230.46 an ounce by 3.28pm GMT, taking this week’s gain to 2.2%. On Thursday the metal hit $1,233.13, its highest since March 6.

US gold futures were 0.3% higher at $1,230.40.

"There is momentum as people start to look again how far they can push gold higher," said Georgette Boele at ABN AMRO.

The dollar had hit a ceiling and would fall further in the near term, she said.

US President Donald Trump’s failure so far to push through promised economic stimulus measures may have influenced the Fed, said Tom Kendall at ICBC Standard Bank.

"If infrastructure spending and tax cuts are being pushed further and further out, it gives the Fed more reason to be cautious," he said. "That is a bit of a vacuum that gold can rally into."

Failure to deliver swift tax cuts and regulatory reform could puncture a rally in US stocks, said Edward Meir at INTL FCStone.

"Any retracement in stocks could help gold build on its recent move," he said in a note. Investors were also looking ahead to the Group of 20 (G20) finance leaders’ meeting in Germany this weekend, where any attempt by the Trump administration to pursue protectionist policies could fuel demand for gold as a safe haven.

"However, strong US economic growth will inevitably push the Fed to ratchet up rates, pressuring gold, said ICBC’s Kendall, who sees gold averaging $1,140 in the second quarter. Rate rises lead to higher bond yields, which increase the opportunity cost of holding nonyielding bullion and tend to boost the dollar, in which gold is priced.

Holdings of the world’s largest gold-backed exchange-traded fund, New York-listed SPDR Gold Shares, fell 0.28% on Thursday, the first outflow this week.

Silver was up 0.4% at $17.35 an ounce, while platinum gained 0.4% to $957.75 and palladium advanced 1.5% to $775.60.

Reuters

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