Bengaluru: Gold prices hit a two-week high on Monday as the dollar held near five-week lows reached in the previous session, finding support from the US Federal Reserve’s conservative guidance on the path of rate hikes this year.
Spot gold rose 0.4% to $1,233.60 per ounce by 8.40am, after earlier touching $1,234.60 an ounce, its highest since 6 March.
US gold futures gained 0.3% to $1,233.90.
The dollar index, which measures the greenback against a basket of currencies, was down 0.1% at 100.160, holding near Friday’s lows.
“The dollar is weaker across the board in Asia and also against the euro. It’s pushing gold higher a pure technical buying,” a Hong Kong-based precious metals trader said.
“The market was geared for a hawkish FOMC and the Fed was really dovish. There was a lot of short-covering. People are now putting gold back on the plate and are more comfortable.”
Spot gold prices are expected to test a resistance at $1,237 per ounce, a break above which could lead to a gain to $1,243, according to Reuters technical analyst Wang Tao.
Markets are also bracing for a packed week of Fed messaging with no less than nine different policy makers set to speak, including chairwoman Janet Yellen on Thursday.
Yellen’s cautious guidance last week has investors pricing in almost no chance of another rate rise at the next policy meeting in May, rising to around 50-50 for June.
Since the policy decision to boost rates on Wednesday, gold prices have rebounded more than $35 as the dollar plumbed five-week lows after Yellen’s signal of a slower pace of rate increases this year disappointed dollar bulls.
“With concerns of a more hawkish Fed now easing, the outlook for gold looks a little bit more positive,” ANZ analysts said in a note on Monday.
Hedge funds and money managers had slashed net long positions in COMEX gold for the second straight week in the week to 14 March.
Money managers cut their net long position in bullion by 44,058 lots to 49,835 lots, the lowest since early January.
During that week, prices dropped about 1.5% on firm expectations that the Federal Reserve would hike US interest rates in March and as the dollar strengthened.
Holdings of SPDR Gold, the world’s largest gold-backed exchange-traded fund, fell 0.35% to 834.10 tonnes on Friday.
Spot silver rose 0.4% on to $17.39 per ounce on Monday. Platinum was up 0.5% to $962.50, while palladium rose 0.4% to $775.50. Reuters