Gold Futures Advance as Weaker Dollar Boosts Appeal of Metal

  • Dollar falls as central banks signal looser policy is working
  • Federal Reserve policy makers due to gather next week

Gold futures gained for the first time in three sessions as the dollar weakened against the euro, boosting the appeal of the precious metal as a alternative asset.

The dollar fell against the euro on speculation that European Central Bank will refrain from extending its asset-purchase program after it said lending conditions continued to improve in the third quarter. Bullion swung between gains and losses on below-average volume as traders assess clues from the Federal Reserve, which meets next week and again in December.

Gold slipped more than 5 percent in the past year amid concerns that the Fed will soon raise interest rates. Higher rates cut the appeal of gold because it doesn’t pay interest.

“The weaker dollar is allowing precious metals to get a positive lift,” Tim Evans, the chief market strategist at Long Leaf Trading Group Inc. in Chicago, said in a telephone interview. “This is all a Fed story for the next week.”

Gold futures for December delivery increased 0.4 percent to settle at $1,177.50 an ounce at 1:45 p.m. on the Comex in New York. Earlier, prices fell as much as 0.5 percent. Trading was 14 percent below the 100-day average for this time, according to data compiled by Bloomberg.

U.S. Rates

John Williams, president of the Fed Bank of San Francisco, said Monday that the central bank should raise borrowing costs soon and slowly. Fed-fund futures show a 32 percent chance of a rate increase by December.

“The gold market is just waiting for the FOMC meeting next week,” said Howie Lee, an analyst at Phillip Futures Pte in Singapore, referring to the Federal Open Market Committee. “It looks to be a foregone conclusion right now, probably no rate hike in October, but I think the focus is all there.”

Investors have been adding to holdings in gold-backed exchange-traded products. Assets rose 7.5 metric tons to 1,544.9 tons as of Monday, the highest since July, data compiled by Bloomberg show. Holdings had reached a six-year low in August.

Silver rose on the Comex, while palladium and platinum advanced on the New York Mercantile Exchange.

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