Gold brought in good projections as it rose to a one-week high on Thursday despite of a weaker dollar, with the influencing factor of an increased demand from Chinese retail investors and the wait for the announcement of a new chair of the U.S. Federal Reserve.
Gold is highly sensitive to U.S. interest rates rising, as these increase the opportunity cost of holding non-yielding bullion, while pushing up the dollar, in which it is priced.
Spot gold may rise into a range of $1,289 to $1,295 after its potential break of resistance at $1,283.
U.S. gold futures edged up 0.1 percent at $1,278.10 per ounce, while Spot gold was at the same price per ounce which translates to an increase of 0.3 percent after rising earlier to $1,281.43, the highest since Oct.26.
“The return of Chinese investor interest in gold at these levels is a welcome vote of confidence for long-suffering gold bulls,” an analyst stated, adding that global prices have risen to narrow the gap and higher demand from Chinese retail buyers resulted to domestic bullion prices rising.
The Next Head of Fed
The nomination of Jerome Powell as the next head of the Fed by U.S. President Donald Trump is widely expected on Thursday, putting his mark on the leadership of the U.S. central bank while sending signals about the monetary policy’s continuity.
“A lot of the focus is on the Fed chair, and Trump’s expected nomination of Jerome Powell,” stated OCBC analyst Barnabas Gan.
“The current movement in prices is not really about him (Powell) being hawkish or dovish, but more so about market uncertainty about what his nomination would mean,” Gan added.
Interest rates were unchanged by the Fed on Wednesday and drew attention to a solid U.S. economic growth. A strengthening labor market was also shown while they played down the recent impact of the hurricanes, an indication that it is on track to relieve borrowing costs in December again.
“Right now, we see prices supported above $1,270 until perhaps a week from now. But beyond that, when the Fed meets in December, we expect one more rate hike,” stated analyst Gan, explaining that they are still bearish on gold and expect a prices to reach $1,250 at year-end, under the rate hike’s weigh in.
The dollar came down from a 3-1/2-month high and fell against the yen and euro, slumping ahead of a U.S. tax bill that will be revealed after a one-day delay.
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