Picture: BLOOMBERG
Picture: BLOOMBERG

Bengaluru — Gold rose for a sixth day on Friday, buoyed by a weaker dollar, with investors waiting for key US inflation data for clues on the outlook for potential increases in US interest rates.

Spot gold was up 0.2% at $1,296.21 an ounce by 3.28am GMT.

The metal was on track to post its first weekly gain in five weeks.

US gold futures for December delivery climbed 0.2% to $1,298.60/oz.

“We remain somewhat cautious on gold here, as we think the complex will have some difficulty moving higher as we approach both the European Central Bank (ECB) meeting and the Fed rate increase slated for year-end,” INTL FCStone analyst Edward Meir said in a note.

“Having said that, with the political situation in Washington looking messy and potentially bearish for the dollar … the precious metal could see an element of support materialising as well.”

The dollar slipped on Friday, on track for weekly losses as investors awaited the US inflation data to gauge the likelihood that the Federal Reserve will stick to its plan to raise interest rates again this year. 

The greenback hit a low of more than two weeks against a basket of currencies in the previous session after minutes from the Fed’s September meeting showed the central bank was concerned over low inflation.

Hurdles in US tax and healthcare reforms had also recently pressured the currency.  

However, data on Thursday showed US producer prices rose in September, suggesting signs of underlying strength in both wholesale inflation and the labour market, potentially leaving the Fed on track to raise interest rates again in December.

Markets are now pricing in a nearly 90% chance of a December rate hike, according to CME Group’s FedWatch tool.

Gold is highly sensitive to rising interest rates, as these tend to boost the dollar, putting pressure on the dollar-denominated asset.

Elsewhere, ECB chief Mario Draghi defended a pledge to keep interest rates at rock bottom on Thursday, while the Bank of Japan’s Haruhiko Kuroda stressed the central bank’s resolve to maintain its ultra-loose monetary policy.

“Draghi’s phrasing could have provided gold with support as well, as it showed that not all central banks are moving at the same speed towards tightening policy and some(like the BoJ) have no intention at all.”

Spot gold may retest a resistance zone of $1,297-$1,299, a break above which could lead to a gain to $1,305, Reuters technicals analyst Wang Tao said. Silver was up 0.6% at $17.26 an ounce, after marking a more than three-week high earlier in the session.

Platinum was 0.5% higher at $937.60 an ounce, while palladium climbed 1% to $982.25/oz.

Reuters

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