By Seher Dareen
(Reuters) – Gold prices climbed more than 1% to their highest levels in a week on Tuesday and other precious metals also rallied on the back of a sliding dollar, as markets remained focused on the Federal Reserve’s interest rate strategy.
Spot gold was up 1.5% to $1,814.68 per ounce by 1549 GMT. U.S. gold futures rose 1.7% to $1,828.30.
The yen surged to a four-month peak against the dollar after the Bank of Japan stunned markets by deciding to review its yield-curve control policy. [USD/]
The new U.S. spending bill is putting more pressure on the dollar, with gold prices rallying based on more liquidity being injected into the system, said Jeffrey Sica, chief executive officer of Circle Squared Alternative Investments.
The U.S. Congress was moving forward with a $1.66 trillion government funding bill, scrambling to pass a measure.
“I see that it’s going to be a dark shadow on the gold market, but I still think we’re headed for an upside based on all the chaos,” Sica added, referring to the prospect of the Fed continuing to raise rates.
Fed Chair Jerome Powell last week said the U.S. central bank will deliver more rate hikes next year even as the economy slips towards a possible recession.
Bullion has shed more than $260 an ounce since its March peak as central banks stepped up efforts to fight soaring inflation, but it is enjoying its best quarter since early 2020, up 9.3% so far.
Higher interest rates increase the opportunity cost of holding bullion that pays no interest.
Meanwhile, China was grappling with surging COVID-19 cases, and the World Bank cut its growth outlook for this year and the next for the top consumer of bullion.
Elsewhere, spot silver rose 4.5% to $23.98 per ounce, posting its biggest intraday gain since early November.
Platinum rose 3.2% to $1,011.17 while palladium was up 2.88 % to $1,717.38.
(Reporting by Seher Dareen in Bengaluru; Editing by Paul Simao)
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