Gold holds firm on struggling dollar and equity sell-off
The Fed's failure to reassure investors that it understands the risks across global markets could fuel appetite for safe-haven gold in the short- to medium-term, one analyst says
Bengaluru — Gold prices steadied on Friday, holding firm near a six-month high struck in the previous session, as the dollar remained under pressure due to a subdued outlook towards US interest rates and the economy, and investors shunned risky assets.
Spot gold was down marginally at $1,259.16 per ounce, as at 4.17am GMT, after jumping more than 1% in the previous session. The precious metal hit a high of $1,266.4 on Thursday, a level last seen on June 26.
Bullion has gained about 1.7% so far this week, in what would be its second weekly gain in three.
US gold futures declined 0.4% to $1,263.3 per ounce on Friday.
"A depreciating dollar coupled with expectations of fewer rate hikes in 2019 remain the primary factors supporting spot gold prices," said Lukman Otunuga, a research analyst with FXTM.
"The US Federal Reserve's failure to reassure investors that they understand the risks across global markets is seen fuelling appetite for safe-haven gold in the short- to medium-term."
The Fed's commitment on Wednesday to retain the core of its plan to tighten monetary policy, despite rising uncertainty about global economic growth, rattled stock markets and pressured the dollar, making US currency-denominated gold more appealing for non-US investors.
"Traders expect risk sentiment to remain on very wobbly conditions entering the new year," said Stephen Innes, Asia Pacific trading head at Oanda in Singapore.
The dollar's weakness against its Japanese peer has parked gold in "a perfect spot" for investors, Innes added.
Global stocks continued their slide on Friday as the threat of a US government shutdown and of further hikes in US borrowing costs fanned investor unease over the economic outlook.
US President Donald Trump's refusal to sign a legislation to fund the government unless he gets money for a border wall, spooked investors, thus risking a partial federal shutdown on Saturday.
"With volatile equity markets accelerating the flight to safety, gold is likely to remain supported for the rest of 2018," FXTM's Otunuga said.
SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 0.34% to 769.14 tonnes on Thursday.
Among other precious metals, palladium fell 0.3% to $1,260.50 per ounce, but was up 2%t for the week in what would be its fourth consecutive weekly gain.
Silver fell 0.1% to $14.75 per ounce, but has gained 1% so far in the week.
Platinum fell 0.1% to $792.80 per ounce but was headed for its weekly gain for the first time in seven.