Gold extended gains after September minutes from the U.S. Federal Reserve showed policymakers debated the prospects of a pickup in inflation and the path of future interest rate rises if it did not.
The U.S. central bank should gradually increase interest rates over the next two years, bringing the federal funds rate to 2.5 percent, said San Francisco Fed President John Williams, separately at an event in Utah.
Spot gold was up 0.4 percent at $1,292.88 per ounce by 3:43 p.m. EDT (1943 GMT), while U.S. gold futures futures for December delivery settled down $4.90, or 0.4 percent, at $1,288.90 per ounce, prior to the release of the minutes.
“The Fed minutes seemed to be stressing that low inflation may not be transitory and emphasized data dependency,” said Bart Melek, head of commodity strategy at TD Securities in Toronto. “This is somewhat positive for gold relative to where we were positioned just ahead.” Gold could reach $1,300 per ounce by week’s end, Melek added. Gold is highly sensitive to rising interest rates, as these increase the opportunity cost of holding non-yielding bullion while boosting the dollar, in which the metal is priced.
Spot gold hit the highest level in nearly two weeks on Tuesday, and on Wednesday, made its fourth straight day of gains. Before that, gold had been declining since early September after touching a 1-year high of $1,357.54. The dollar index fell to the lowest in nearly two weeks, making dollar-priced gold cheaper for buyers using other currencies.
“These concerns about the ramifications of the Catalan independence referendum are fading, giving some support to the euro and weakening the dollar,” said Jens Pedersen, senior analyst at Danske Bank in Copenhagen. Catalonia’s leader, who balked earlier at making a formal declaration of independence, together with more upbeat predictions for the global economy, helped push world stocks to another record high.
“With equities at all-time highs, gold also looks attractive as a hedge, especially given the correlation between the two assets has remained in negative territory this year,” Joni Teves, strategist at UBS in London, said in a note.
In other precious metals, silver rose 0.8 percent to $17.22 per ounce, having hit a three-week high in the previous session.
Platinum rose 0.02 percent to $929.20 per ounce, hitting a two-week high of $934.50 and palladium increased 2.8 percent at $959.75, a one-month high.