Gold benefits from slipping dollar and expected Fed stance
US central bank might not change current narrative, but there is a belief that it would be able to trigger inflation, analyst says
Bengaluru — Gold prices rose on Monday, supported by a weaker dollar and expectations that the US Federal Reserve will adopt a dovish stance at its two-day monetary policy meeting later this week.
Spot gold was up 0.4% at $1,949.92 per ounce by 5.09am, adding to the previous week’s 0.2% gain. US gold futures climbed 0.6% to $1,958.60.
“The gold market is leaning towards the Fed’s [policy],” said Stephen Innes, chief market strategist at AxiCorp, adding that the US central bank might not change the current narrative, but there is a strong belief in the market that it would be able to trigger inflation.
The lower interest rate environment and long-term expectations that the Fed will increase quantitative easing and weaken the dollar are supporting gold prices, he added.
The dollar index eased 0.1% against its rivals, with focus on the Fed’s policy announcement on Wednesday. A weaker dollar makes gold less expensive for holders of other currencies.
Market participants are also waiting for the Bank of Japan and the Bank of England’s policy decisions, due on Thursday.
Major central banks have rolled out unprecedented stimulus measures and kept interest rates low, driving gold to new highs because of its role as a hedge against inflation and currency debasement.
Meanwhile, the European Central Bank’s president, Christine Lagarde, said eurozone governments must keep spending heavily to aid the bloc’s recovery from its historic pandemic-induced recession, complementing already super-easy monetary policy.
“Gold’s bullish longer-term fundamentals have not changed,” Jeffrey Halley, a senior market analyst at Oanda, said in a note.
“Gold has well-denoted support between $1,900 and $1,920 an ounce, with trendline resistance at $1,970.”
Limiting gold’s advance, investors’ appetite for riskier assets increased as hopes for a potential Covid-19 vaccine resurfaced after AstraZeneca resumed its phase-3 trial.
Elsewhere, silver gained 0.4% to $26.84 per ounce, platinum jumped 1.6% to $939.58 and palladium rose 0.2% to $2,325.
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