Gold climbs to 5-week high as Sept Fed hike hopes fizzle

Gold rose to its highest in nearly five weeks on Thursday after minutes from the Federal Reserve's policy meeting last month signalled that a hike in US interest rates in September may be unlikely. 

PHOTO: REUTERS

AUG 20, 201511:07 AM

[MANILA] Gold rose to its highest in nearly five weeks on Thursday after minutes from the Federal Reserve's policy meeting last month signalled that a hike in US interest rates in September may be unlikely.

Fed officials worried that lagging US inflation and a weak global economy posed too big a risk to commit to a "lift off" on rates, buoying gold that had been out of favour amid an imminent tightening in US monetary policy. "Given that the possibility for a hike in September has diminished, I would think there is a higher probability for a December rate hike. And that does give a near-term support to gold prices," said Barnabas Gan, analyst at OCBC Bank in Singapore.

Spot gold touched US$1,135.20 an ounce, its loftiest since July 17, and was flat at US$1,134 by 0232 GMT.

US gold for December delivery rose half a per cent to US$1,133.80 an ounce.

Spot gold has now recovered more than 5 per cent from a 5-1/2-year low of US$1,077 reached in a late July rout.

The precious metal is on track for a second weekly gain after ending its longest retreat since 1999, having benefited last week from uncertainty posed by China's surprise devaluation of its currency.

A potential delay in a rate increase to December offers upside potential for non-interest bearing gold, with OCBC's Gan seeing initial resistance at US$1,150, a level last seen in May.

Many analysts had been betting on a rate hike when Fed officials next meet in September given sustained strength in the world's largest economy. But some thought policymakers might take a gradual approach in lifting rates after China's yuan devaluation.

MKS Group trader Samuel Laughlin said gold closing above US$1,132 on Wednesday was "technically bullish" for the metal, adding "we may see a move towards US$1,145-$1,150 in the short term." Amid the bullish tone for gold, spot platinum matched Wednesday's five-week high of US$1,014 an ounce and was last up 0.2 per cent at US$1,013.50. Palladium slipped 0.2 per cent to US$609.20 per ounce and silver was steady at US$15.31.

REUTERS