Weaker dollar after Fed decision gives gold a lift

Bengaluru — Gold prices gained on Thursday, as the dollar weakened after the US Federal Reserve decided it would end its pandemic-era bond-buying programme in March, with investors now awaiting policy decisions from other major central banks.

Spot gold was up 0.3% at $1,782.81/oz as of 5.51am GMT, while US gold futures jumped 1% to $1,783.00.

“Any dollar weakness should see a corresponding rise in gold. The expectation is for a winding back of fiscal and monetary stimulus. If this view is unchanged, then it would be reasonable for gold prices to remain below $1,800,” said Michael Langford, director at corporate advisory AirGuide.

The dollar index weakened from a three-week high scaled in the previous session after the US central bank said it would pave the way for three quarter-percentage-point interest rate increases by the end of 2022 as the economy nears full employment and the Fed copes with accelerating inflation.

Reduced stimulus and interest rate hikes tend to push government bond yields up, raising the opportunity cost of holding bullion, which bears no interest.

European Central Bank officials are set to call time on the central bank’s pandemic emergency purchase programme, but investors will look to see how the six-year old asset purchase programme may pick up the slack, though rate rises are a way away.

Investors now await US weekly initial jobless claims data due at 1.30pm GMT.

“The unemployment data will not have a large impact on gold … we have monetary policies from the European region, so that may put some pressure on gold prices, but overall the sentiment is positive,” said Jigar Trivedi, a commodities analyst at Mumbai-based broker Anand Rathi Shares.

“The year-end sees $1,840-$1,850 as a resistance for gold.”

Spot silver rose 0.5% to $22.16/oz, with platinum and palladium rising 0.2% to $920.50 and 3.6% to $1,653.81, respectively. 

Reuters