By Arpan Varghese
(Reuters) – Gold firmed on Friday, en route to a weekly gain, buoyed by the dollar’s retreat on a perceived dovish tilt in the U.S. Federal Reserve’s interest rate hike strategy.
Spot gold gained 0.3 % to $1,760.15 per ounce by 0413 GMT, having risen 0.6% so far this week. U.S. gold futures advanced 0.9% to $1,760.40 .
Silver eased 0.2% to $21.46, but was up about 2.7% for the week.
The dollar’s retracement has kept gold well-supported as “the slower pace of rate outlook is being looked upon as a sign of peak hawkishness to further unwind the bearish positioning in the yellow metal built up since the start of the year,” said IG market strategist Yeap Jun Rong.
A “substantial majority” of Fed policymakers agreed it would “likely soon be appropriate” to slow the pace of rate hikes, the readout of the Nov. 1-2 meeting showed on Wednesday.
This pressured the dollar, making gold cheaper for overseas buyers. [USD/]
Gold could bounce to $1,790-1820 by December-end, led by safe-haven demand and the dollar’s weakness amid a dovish Fed, said Jigar Trivedi, analyst with Mumbai-based Reliance Securities.
A majority of traders expect a 50 bps rate increase at the Fed’s December meeting.
But the December meeting will be a “black box” event given the variation in projections before and after recent cooler-than expected U.S. inflation data, leaving gold sensitive to upcoming data as buyers look “for greater conviction that current rate hike expectations are well-anchored,” Jun Rong added.
High rates have kept a leash on gold’s traditional status as a hedge against high inflation and other uncertainties this year, as they translate into higher opportunity cost to hold the non-yielding asset.
Holdings of the top SPDR Gold Trust gold-backed exchange-traded-fund have shed about 68 tonnes since the beginning of this year. [GOL/ETF]
Platinum added 0.7% to $994.38, while palladium rose 0.4% to $1,887.50.
Graphic: Gold Technicals – https://fingfx.thomsonreuters.com/gfx/ce/egpbykqbqvq/Pasted%20image%201669346934470.png
(Reporting by Arpan Varghese in Bengaluru; Editing by Rashmi Aich and Uttaresh.V)
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