The Gold Party's Back on After Yellen Reassures the Market

Updated on
  • Call options for $1,250 an ounce gold see volumes triple
  • Futures on course for steepest price gain in eight months

UBS' Gordon Sees Better Gold Prices After Fed Hike

For the gold market, the Federal Reserve has gone from killjoy to life of the party.

The top three most-actively traded gold options are bets on further price gains. The price and volume on the option giving holders the right to buy bullion futures for April delivery at $1,250 an ounce more than doubled. Futures had their steepest climb in eight months on Thursday.

The gold rally had faltered in March after two straight monthly gains amid concerns that the Fed would raise interest rates this year at a faster pace than it projected in December. Fed Chair Janet Yellen eased those concerns on Wednesday, reassuring investors that monetary policy will remain accommodative “for some time.” Policy makers left unchanged their projection for two more increases this year after Wednesday’s rate hike.

“Three interest-rate hikes are already baked in the price, and this is our base case,” said Naeem Aslam, the chief market analyst at Think Markets U.K. Ltd. “It may be foolish to stay on the short side when it comes to the precious metal.”

Gold futures for April delivery advanced 2.2 percent to settle at $1,227.10 an ounce at 1:40 p.m. on the Comex in New York, the biggest gain for a most-active contract since June 24. The metal headed for its first weekly increase since Feb. 24.

In other precious metals:

* Silver futures had the steepest ascent in two months on the Comex, while platinum and palladium futures climbed on the New York Mercantile Exchange
* A Bloomberg Intelligence gauge of 15 big global gold producers rose 2.1 percent, paced by gains in Gold Fields Ltd., Sibanye Gold Ltd. and AngloGold Ashanti Ltd.

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