Gold remains near seven-month high on the hope the Fed will keep rates on hold
Bengaluru — Gold prices held steady on Monday, near a seven-month peak scaled in previous session, on the hope the US Federal Reserve will keep interest rates unchanged during its two-day policy meeting later in the week.
Spot gold was firm at $1,302.58/oz by 3.08am GMT, while US gold futures climbed 0.3% to $1,301.90/oz.
The Federal open market committee meets between January 29 and 30, and chairman Jerome Powell is widely expected to acknowledge growing risks to the US economy as global momentum weakens.
“Gold is having a very positive macro stance in the sense the US Fed is going to be more accommodative along with the European Central Bank (ECB), which is seeing downside risks to the economy,” said Edward Moya, market analyst at Oanda.
The Fed raised interest rates four times in 2018 and has signalled it will probably lift borrowing costs twice in 2019, although some central bank officials have said they will be patient in raising rates.
ECB president Mario Draghi warned last week that a dip in the eurozone’s economy could be more pronounced, comments seen as signalling a delay in the bank’s first interest rate hike.
Gold tends to appreciate on expectations of lower interest rates, which reduce the opportunity cost of holding nonyielding bullion.
Meanwhile, Asian stocks advanced on Monday as Wall Street rallied after a deal was announced to reopen the US government following a prolonged shutdown that had shaken investor sentiment.
The shutdown had added to the worries of investors who were already concerned over slowing global growth, signs of stress in corporate earnings and a still unresolved China-US trade war.
“While the shutdown concerns are alleviated now, the long- term play is really uncertain,” Moya said.
Spot gold rose 1.8% on Friday, notching up its best one-day percentage gain since October 11, hitting its highest since June 14 2018. The metal also broke above the psychological level of $1,300 after failing multiple times due to strong technical resistance.
“With a breakout of sorts now evident on the gold charts, there could be further upside room for the precious metal,” INTL FCStone analyst Edward Meir said in a note.
“The Fed meeting this week could be instrumental in triggering more dollar selling as well, as could positive Brexit developments, which is why we would stay long gold going into the week.”
Among other metals, palladium was steady at $1,361.50. Its price had hit a record high of $1,434.50 on January 17.
Platinum rose 0.3% to $816.
Silver, meanwhile, was firm at $15.76/oz.