Gold Gains Most in a Week on U.S. Fed Reserve Rate Caution

Why Investors Should Bet on Gold
  • Minutes showed Fed officials were in no rush to raise rates
  • Gold holdings in exchange-traded funds increase by 5.6 tons

Gold gained the most in a week after Federal Reserve minutes indicated policy makers remained cautious about raising U.S. interest rates, making the precious metal look more competitive against interest-bearing assets.

Minutes of the Fed’s March 15-16 meeting released Wednesday showed officials highlighted persistent risks facing the global outlook and the threats they posed to the health of the U.S. economy. Gold is benefiting, with traders giving about a 50-50 chance of a rate increase by December.

The metal has climbed 17 percent this year as the dollar weakened, spurring demand for an alternative asset. The Japanese yen surged to its strongest level in almost 1 1/2 years on Thursday amid the Bank of Japan’s apparent reluctance to intervene.

“The Fed minutes yesterday confirmed the market view that the chances of a rate hike in the short term were extremely limited which, with the huge overnight surge in Japanese yen, helped set the table for today’s sharp gold rally,” Tai Wong, director of commodity products trading at BMO Capital Markets in New York, said by telephone.

Gold futures for June delivery climbed 1.1 percent to settle at $1,237.50 an ounce at 1:43 p.m. on the Comex in New York, the biggest gain since March 29.

In ETFs and other metals:

  • Holdings in exchange-traded funds backed by gold climbed 5.58 tons to 1,762.1 tons on Wednesday, according to data compiled by Bloomberg.
  • Silver futures for May delivery rose 0.7 percent to $15.158 an ounce.
  • On the New York Mercantile Exchange, platinum gained while palladium dropped.
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