(Australian Associated Press)
Gold has risen to a 12-week high, shrugging off strong stocks with nervous investors moving into safe-havens as the US Federal Reserve began a two-day meeting expected to give clues about the timing of the next interest rate increase.
Spot gold was up 1.3 per cent at $US1,121.80 an ounce at 2.16 pm EST (0616 Wednesday AEDT), the highest since November 4.
US gold futures for February delivery settled up 1.3 per cent at $US1,120.20 an ounce, the highest since early November.
“I think what the market’s hoping for is a dovish Fed,” said Rob Haworth, senior investment strategist for US Bank Wealth management in Seattle.
“You’re getting a bit of a short-covering rally, some safe-haven flows.”
Still, Haworth said that expectations for lower inflation make it hard to build a bullish case for gold.
Global stock markets and oil prices rose, while the US dollar fell 0.3 per cent.
The Fed is expected to take notice of the macro-economic headwinds from China at its meeting, boosting hopes that it may go easy on increasing interest rates further. It is widely expected to leave its federal funds rate unchanged at 0.25-0.50 per cent.
That bodes well for gold. Current ultra-low rates cut the opportunity cost of holding non-yielding bullion, while keeping a lid on the US dollar, in which it is priced.
“We detect investor uncertainty that global financial turbulence may impact the real economy,” HSBC said in a note.
“If this impacts US monetary policy, gold may be a beneficiary. US interest rate futures indicate the Fed may only raise rates one more time this year.”
The metal was also supported by technical signals after closing on Monday above its 100-day moving average, a firm line of resistance earlier in 2016.
“Fundamentals continue to turn more favourable with lower bond yields, a slowing pace of US rate hikes and under invested funds all supporting the move higher,” said Saxo Bank’s head of commodity research Ole Hansen.
China’s net gold imports for December via main conduit Hong Kong surged to the highest in more than two years, data showed, as investors lost faith in collapsing stock markets and a weakening currency and snapped up bullion.
Among other precious metals, platinum was up 1.9 per cent at $US874.51 an ounce, well off last week’s seven-year trough of $US806.31. Palladium was up 0.5 per cent at $US491.90, while silver was up 2.0 per cent at $US14.52.