Picture: 123RF/RONNARONG THANUTHATTAPHONG
Picture: 123RF/RONNARONG THANUTHATTAPHONG

Bengaluru — Gold prices rose to a more than two-week high on Thursday after the US Federal Reserve reaffirmed its stance to keep interest rate near zero until 2023, though the safe-haven metal’s gains were capped by its forecast of a strong economic rebound.

Spot gold rose 0.3% to $1,749.57/oz by 3.40am GMT, having touched its highest since March 1 at $1,755.25. US gold futures jumped 1.3% to $1,749.

The US economy was on track for its fastest expansion in nearly 40 years, the Fed said on Wednesday while reaffirming its ultra-easy monetary policy stance amid an expected, though temporary surge in inflation.

“There was a risk-on response [after the Fed announcement] and the dollar weakened significantly. One might expect dollar negativity to be supportive for gold. That wasn’t what happened. The main logic there really had to do with yields, which were on the march higher,” said DailyFX currency strategist Ilya Spivak.

“They are getting more optimistic and that doesn’t bode well for gold and suggests that the trend lower is likely to continue. It didn’t get a huge decline because the dollar was weaker.”

Higher US interest rates and treasury bond yields raise the opportunity cost of holding non-yielding bullion. The dollar index slipped to a two-week low, while the benchmark US treasury yields held close to a more than one-year peak.

“If the dollar continues its weakening track and yields continue to be calmed by Fed language, then this can set gold up for a test of $1,800,” said Nicholas Frappell, global GM at ABC Bullion.

Palladium gained 1.5% to $2,606.47, extending its rally to the highest level since March 2 2020 after Nornickel , the biggest producer of the metal, slashed its output forecast due to waterlogging at two Siberian mines.

Silver rose 0.4% to $26.44/oz and platinum was up 0.4% at $1,217.78. 

Reuters

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