The price of gold is now on track for its six-week high as it rose for the second time in Thursday’s session. The bullion was lifted by the sluggishness of the U.S. dollar following the decision of Fed signaled a gradual monetary stimulus.
U.S. gold futures advanced by 1.2 percent and traded at $1,264 an ounce for its August delivery. Spot gold rose as much as 0.3 percent to finish at $1.264.31 an ounce after notching it highest level since June 15 at $1,264.90 an ounce.
The two-day meeting of the U.S. Federal Reserve that concluded last Wednesday suggested that the central bank will maintain rates steady; however it is forecasted to begin reducing its immense bond portfolio.
On the same day, the U.S. dollar index was dragged down to its 13-month low by its major peers while Treasury yields advanced following Fed’s decision which seems to be less-hawkish. It is already given that a weaker greenback is good for the yellow metal because it will make the non-yielding bullion expensive for holders outside the United States. This will further lessen the demand.
Wing Fung Financial Group’s head of research Mark To said that investors are slowly pricing the whole movement and they already considered the Fed’s outlook on the economy is neutral, adding that the market doesn’t seem expect another interest rate hike in the near future.
Gold futures are fragile on rate hikes because it will lift the opportunity cost of owning the yellow metal whilst strengthening the U.S. dollar.