Gold price recovers, outlook improves on dovish Fed

Otmane El Rhazi from The Bullion Desk.

The gold price continued to recover on Thursday morning following dovish statements from the Federal Reserve on when it may choose to raise interest rates.

Spot gold was last at $1,210.90/1,211.70 per ounce, up $21.60 on Wednesday’s close after falling as low as $1,183.30 in the previous session following the meeting.

The Federal Reserve is not in a rush to raise interest rates, it said in what was seen as a moderately dovish policy statement.

The apparent delay to the timing of the US central bank’s first rate increase has created a more favourable environment in the near-term for gold prices.

“With the Fed still dovish and with all the uncertainty in the markets, we would not be surprised if precious metals got some lift,” FastMarkets analyst William Adams said.

The Federal Open Market Committee (FOMC) can be “patient in beginning to normalize the stance of monetary policy”, it said, adding that this new language is consistent with its previous position that the federal fund rate will remain unchanged for a “considerable time” following the end of QE3 in October.

“There are a couple of key points for gold from yesterday’s FOMC meeting: 1) the Fed indicated that despite slightly different language, the intent of its current policy guidance is unchanged from the last meeting and, 2) forecasts for interest rates for 2015-2017 have been nudged lower,” UBS Edel Tully said.

“Both are positive for gold, at the margin, and has likely contributed to its current resilience in the face of a stronger dollar,” she added in a reseach note.

While dollar movements remain in focus, Russia’s currency crisis continues albeit the rouble is slightly better than earlier in the week where it hit 79 against the dollar.

In a conference this morning, Russian President Vladimir Putin insisted that Russia’s economy will stabilise although he warned that it could last a further two years.

While blaming the crisis on external factors, Putin urged the country’s central bank not to “burn” its $419 billion of reserves to help stabilise the country amid rumours that the country may buy or even sell gold to prop up the rouble, which was last at 61.66.

In data today, the German IFO business climate number at 105.5 was as predicted and up from 104.7 last month. US unemployment claims, the flash services PMI, the CB leading index and the Philly fed manufacturing index are due later.

In the other metals, silver also broke back above resistance at $16 and was last at $16.12/16.17 per ounce, up 42 cents. Platinum was last at $1,208/1,213, up $18 and palladium was $13 higher at $788/793.

(Editing by Mark Shaw)

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