Gold Extends Advance as U.S. Rates Seen Staying Low for Longer

  • Fed may push prospect for higher rates further into the future
  • Policy makers scheduled to release policy statement Wednesday

Gold jumped the most in more than three weeks amid speculation that the Federal Reserve will refrain from raising interest rates and push out expectations for an increase into next year.

The Federal Open Market Committee is scheduled to release a policy statement at 2 p.m. in Washington following a two-day meeting. Fed-fund futures show a 4 percent chance that rates will increase at this gathering, down from 49 percent two months ago. Futures show just a 35 percent chance rates will rise by the end of the year. Higher rates cut the appeal of gold because it doesn’t pay interest or offer dividends, unlike competing assets.

Gold prices have swung between year-to-date gains and losses more than a dozen times in 2015 amid the back-and-forth debate on whether rates will rise. Over the past few months, concerns have mounted that deteriorating global growth, especially in China, will become a drag on the U.S. Fed policy makers have cited low inflation as a risk to the American economy, and the prospect of cooling expansion could prompt them to keep rates near zero percent.

“We’ve been getting lousy data. and I think the Fed is going to acknowledge that,” Bart Melek, the head of commodity strategy at TD Securities in Toronto, said in a telephone interview. “It means you’re probably not going to get a U.S. dollar rally and you trust that rates may stay lower.”

Gold futures for December delivery climbed 1.3 percent to $1,180.40 an ounce at 11:25 a.m. on the Comex in New York, heading for the biggest gain since Oct. 2.

Holdings in exchange-traded funds backed by gold rose 2 metric tons on Tuesday, the most in a week, to 1,543.1 tons.

Silver futures for December delivery rose 2.8 percent to $16.31 an ounce on the Comex, after touching $16.34, the highest since June.

Before it's here, it's on the Bloomberg Terminal.