Gold Has First Weekly Gain in a Month After Fed Holds Rates

  • Prices reach 2-week high as Yellen keeps rates at record low
  • Measure of bullion-producer shares jumps as much as 12%

Gold bulls can thank the Federal Reserve for the first weekly advance in a month.

Futures reached a two-week high after Fed Chair Janet Yellen cited concern over slowing growth in China and turbulence in global markets for keeping interest rates unchanged. That’s good news for gold bulls, suffering from prices near a five-year low.

Gold is heading for a third annual decline as U.S. job growth boosted speculation the Fed would lift rates this year, even as inflation remained below the central bank’s target. While Yellen said most policy makers still expect a rate increase in 2015, traders pushed their bets to next year. Higher borrowing costs hurt bullion because the metal doesn’t pay interest, unlike some competing assets.

“There’s a lot of concern about the economy,” Fain Shaffer, the president of Infinity Trading Corp. in Indianapolis, said in a telephone interview. “The Fed not raising rates was good for cheap money, but it’s a bad indicator that the economy is not on the mend. That’s why there’s a lot of money flowing into precious metals.”

Gold futures for December delivery gained 1.9 percent to settle at $1,137.80 an ounce at 1:46 p.m. on the Comex in New York, after touching $1,141.50, the highest since Sept. 2. Prices had a 3.1 percent gain this week.

“All eyes have been on the Fed,” Mark O’Byrne, the executive director of Dublin-based brokerage GoldCore Ltd., said by phone. “The longer interest rates stay at these record low levels, the better for gold.”

Producers Advance

A measure of the biggest producers compiled by Bloomberg jumped as much as 12 percent to a three-week high. The index is rebounding after tumbling 28 percent this year through Thursday.

“At some point in time, the U.S. will raise rates, and as such the upside for gold will continue to be limited,” David Govett, head of precious metals at broker Marex Spectron Group in London, said in an e-mailed report. “The world is exactly the same as it was yesterday. Quite frankly, there is no massive reason to get overly bullish of the precious complex.”

Silver futures gained on the Comex. Platinum and palladium advanced on the New York Mercantile Exchange.

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