Gold prices are benefiting from the weaker dollar after the US Federal Reserve decided to withdraw its pandemic-era stimulus
17 December 2021 - 07:48
bySeher Dareen
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A worker loads 12.5kg gold ingots onto a trolley ready for distribution at the JSC Krastsvetmet non-ferrous metals plant in Krasnoyarsk, Russia. Picture: BLOOMBERG/ANDREY RUDAKOV
Bengaluru — Gold prices climbed on Friday, poised for their best week since mid-November, as the dollar weakened after the US Federal Reserve decided to withdraw its pandemic-era stimulus in response to fight broadening inflationary risks.
Spot gold was up 0.2% at $1,802.87 an ounce, as of 3.23am GMT, while US gold futures rose 0.3% to $1,802.60. The metal has risen 1.1% so far in the week, heading for its first weekly gain in five.
The dollar index remained under pressure after hitting a one-week low in the previous session, making greenback-priced bullion cheaper for holders of other currencies. The benchmark 10-year yield dropped 3.8% so far in the week.
“The gold market is benefiting from high inflation, which is outweighing the Fed’s hawkish stance. US 10-year real yield moved deeper into negative territory, keeping the investment backdrop supportive,” ANZ analysts said in a research note.
“Should negative interest rates stay longer than expected, it should favour investor demand for gold.”
Britain became the first G7 economy to hike interest rates since the onset of the pandemic on Thursday, with the US central bank also signalling plans to tighten in 2022 but the European Central Bank only slightly reining in stimulus.
The Bank of Japan on Friday decided to taper its corporate debt purchases to pre-pandemic levels and scale back some of its emergency funding scheme upon reaching the March 2022 deadline.
Reduced stimulus and interest rate hikes tend to push government bond yields up, raising the opportunity cost of holding bullion, which bears no interest.
The US Fed 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 a surge of inflation.
Silver dipped 0.1% to $22.44 an ounce, platinum was flat at $936.01, and palladium rose 1.2% to $1,750.57.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Gold on track for best week in five
Gold prices are benefiting from the weaker dollar after the US Federal Reserve decided to withdraw its pandemic-era stimulus
Bengaluru — Gold prices climbed on Friday, poised for their best week since mid-November, as the dollar weakened after the US Federal Reserve decided to withdraw its pandemic-era stimulus in response to fight broadening inflationary risks.
Spot gold was up 0.2% at $1,802.87 an ounce, as of 3.23am GMT, while US gold futures rose 0.3% to $1,802.60. The metal has risen 1.1% so far in the week, heading for its first weekly gain in five.
The dollar index remained under pressure after hitting a one-week low in the previous session, making greenback-priced bullion cheaper for holders of other currencies. The benchmark 10-year yield dropped 3.8% so far in the week.
“The gold market is benefiting from high inflation, which is outweighing the Fed’s hawkish stance. US 10-year real yield moved deeper into negative territory, keeping the investment backdrop supportive,” ANZ analysts said in a research note.
“Should negative interest rates stay longer than expected, it should favour investor demand for gold.”
Britain became the first G7 economy to hike interest rates since the onset of the pandemic on Thursday, with the US central bank also signalling plans to tighten in 2022 but the European Central Bank only slightly reining in stimulus.
The Bank of Japan on Friday decided to taper its corporate debt purchases to pre-pandemic levels and scale back some of its emergency funding scheme upon reaching the March 2022 deadline.
Reduced stimulus and interest rate hikes tend to push government bond yields up, raising the opportunity cost of holding bullion, which bears no interest.
The US Fed 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 a surge of inflation.
Silver dipped 0.1% to $22.44 an ounce, platinum was flat at $936.01, and palladium rose 1.2% to $1,750.57.
Reuters
SA slipping off foreign investors’ radar
Markets data — December 16 2021
MARKET WRAP: JSE stalls ahead of Fed statement
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