Gold is stable as rise in risk appetite offsets more dovish Fed
Bengaluru — Gold prices held steady on Monday as the expectation that the US Federal Reserve will pause its multiyear interest rate hike cycle, were offset by a recovery in investor appetite for risk.
Spot gold was trading up 0.1% at $1,282.31/oz by 3.06am GMT, while US gold futures were steady at $1,282/oz.
“Dovish signals [from the Fed] have kept dollar strength in check, helping gold. But on the other hand, we have seen them easing bearish sentiments in equity markets,” said Benjamin Lu, analyst at Phillip Futures in Singapore.
Less than two weeks ahead of the US central bank’s first policy meeting of the new year, Federal Reserve officials have left little doubt that they want to stop raising interest rates — at least for a while.
Slower global growth, a stock meltdown last quarter, and a partial US government shutdown that threatens consumer confidence and spending have many in the Fed worried.
“We have seen very positive conditions in US equities and the dollar has also seen a series of positive trades. All these competing influences have capped the safe-haven appeal,” Lu said, adding that gold was facing strong technical resistance at $1,300 levels.
Gold has risen more than 10% since touching one-and-a-half-year lows in mid-August, mainly due to tumultuous equity markets and a softer dollar.
Asian markets were steady on Monday, after Wall Street posted a fourth consecutive week of gains last week.
“On the longer run, we are still very positive on gold on a synchronised slowdown in global economic conditions and geopolitical uncertainties,” Lu said.
Data on Monday showed the Chinese economy slowed at the end of 2018, underlining the urgent need for more stimulus as Beijing wrestles with the US over trade.
Investors are also waiting to hear British Prime Minister Theresa May’s plan B for Brexit, which is due to be presented to parliament later on Monday, after her deal was rejected by MPs last week.
Reflecting investor appetite for gold, holdings of SPDR Gold, the largest gold-based exchange traded fund, rose 1.5% on Friday to 809.76 tons.
Meanwhile, spot palladium, which hit a record high of $1,434.50/oz last week, was up 0.4% at $1,382 on Monday.
“Palladium has eased lower as investors took profits after the recent strong run,” ANZ analysts said in a note.
Palladium has risen 9.5% so far in January on supply concerns in SA and Russia, which are keeping the market tight amid strong demand, the note said.
Spot platinum fell 2.3% to $796.
Spot silver, meanwhile, was steady at $15.33.