Gold Advances to Highest in Three Weeks on Dollar, Rate Outlook

  • The Fed `seems to be a little bit more hesitant': High Ridge
  • Odds on U.S. interest-rate rise in December drop toward 50%

Gold futures rose to the highest in almost three weeks on declines in the dollar and speculation that the Federal Reserve will be slow to boost interest rates.

The Bloomberg Dollar Spot Index fell to the lowest since June. Traders are pricing the odds of a rate increase by December at 48 percent, down from 58 percent a week ago. Last week, minutes of last month’s Fed meeting showed several central bank officials supported a “cautious approach” to raising rates, and that raising as soon as April would “signal a sense of urgency they did not think appropriate.”

Gold’s gains follow its best quarterly rally in three decades as turmoil in financial markets reduced bets that the Fed would tighten monetary policy this year, increasing demand for bullion as a store of value. Lower rates are a boon for gold, which becomes more competitive against interest-bearing assets. The metal’s rally spurred a 93 percent climb this year for a gauge of 14 gold producers tracked by Bloomberg Intelligence.

“The theme has been the notable weakness in the dollar coming from the expectation that the Fed will not raise rates in April,” David Meger, the director of metals trading at High Ridge Futures in Chicago, said in a telephone interview. “The Fed certainly seems to be a little bit more hesitant moving forward than previously thought.”

Gold futures for June delivery gained 1.1 percent to settle at $1,258 an ounce at 1:46 p.m. on the Comex in New York, after touching $1,260.90 the highest since March 22. Prices last week climbed 1.7 percent, the most since March 4.

  • The BI Gold Senior Gold Valuation Peer Group climbed as much as 6.1 percent to the highest since September 2014. Barrick Gold Corp. touched the highest since August 2014 in Toronto.
  • RBC Capital Markets raised its average gold-price forecast for this year by 9 percent, according to a report received on Monday.
  • Holdings in exchange-traded funds backed by gold fell 0.7 metric ton to 1,763.6 tons Friday, according to data compiled by Bloomberg.
  • Silver futures advanced on the Comex in New York, while platinum and palladium rose on the New York Mercantile Exchange.
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