The gold price spiked towards $1,200 on Thursday morning after the US Federal Reserve sought to calm speculation about when it will start to raise interest rates.
Spot gold was last poised just below the key psychological $1,200 level at $1,196.00/1,196.80 per ounce, up $12.20 or around one percent on Wednesday’s close and just below intraday peaks.
The metal, which has not been above $1,200 since June 1, is gaining on a weaker dollar in light of Fed chair Janet Yellen’s somewhat dovish FOMC statement on Wednesday.
While the statement provided little surprise, Yellen said in her press conference that people are putting too much emphasis on when the first increase happens and that there is no fixed schedule for tightening policy.
The market should not expect the central bank to raise interest rates in every meeting or second meeting; instead, the decision remains dependent on data, she added.
There was nothing substantial to change the expectation of at least one change over the final four meetings of 2015 although a second increase would be more gradual.
But the Fed lowered its expectations for growth and employment for 2015 after sluggish growth in the first quarter. It now expects the US economy to grow 1.8-2.0 percent this year, down from 2.3-2.7 percent previously and unemployment, to rise to 5.2-5.3 percent by the end of 2015, up from 5.0-5.2 percent. Inflation targets were unchanged.
The dollar has since come under pressure, allowing gold to move higher – the greenback was last at 1.1400 against the euro, a one-month low. Any further weakness today could nudge gold above $1,200.
Commerzbank sees the Fed starting to lift rates from September and does not see significant gains in gold before then due to the uncertainty, it said. Weak investment demand and subdued physical demand also rule out a sustained move above $1,200, it added.
Uncertainty around Greece’s potential sovereign debt default continues to weigh on financial markets. The stand-off between Greece and its creditors is likely to continue at today’s eurogroup meeting – the country has less than a fortnight left to reach a deal or faces defaulting on a $1.6-billion loan repayment due to the IMF.
“Greece still remains a difficult issue for investors to get their hands around; judging from the euro’s buoyant tone, it seems the markets are not too concerned about Greece defaulting,” INTL FCStone’s Ed Meir said.
But any potential “Grexit” could be more chaotic than the current complacent tone in the markets suggests, he added, meaning that the dollar could find a safe-haven bid, pressuring gold lower.
On the data side, figures later in the session include the US current account, inflation, weekly jobless claims and the Philly Fed manufacturing index.
Other metals also got a lift – silver was last at $16.30/16.35 per ounce, its highest in two weeks, while platinum moved off six-year lows to $1,090/1,095, up $14. Palladium rose $5 to $722/727.
(Editing by Mark Shaw)
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