Gold Price Advances as Fed Rate Wagers Recede on Inflation Data

New York (Oct 19)  Gold advanced to the highest in two weeks as the dollar weakened amid speculation the Federal Reserve will stick to a gradual tightening of monetary policy and as investors digested economic data from China.

Bullion for immediate delivery rose as much as 0.7 percent to the highest since Oct. 5 and traded at $1,270.62 an ounce at 11:13 a.m. in London, according to Bloomberg generic pricing. The metal had climbed 0.9 percent in the prior two days as a gauge of the dollar retreated from a seven-month high.

Gold has rallied 20 percent this year, partly helped by the Fed standing pat on rates. Data on Tuesday showed that while the cost of living in the U.S. rose at the fastest pace in five months in September, the increase in prices excluding volatile food and fuel costs trailed estimates. The odds that interest rates will rise by December fell to 63 percent after the data, down from 66 percent a day earlier.

China’s economy, meanwhile, remained stable in the third quarter with gross domestic product rising 6.7 percent, according to government data Wednesday.

“The probability of a U.S. Federal Reserve rate hike has fallen slightly again,” Commerzbank AG said in a note to investors Wednesday. Commerzbank said lower yields on U.S. Treasuries due in a decade and increased holdings in exchange-traded funds were also supporting the gold price.

Gold is set to rise to $1,347.40 an ounce by the time of the next London Bullion Market Association conference in October 2017, according to a survey of people attending this year’s gathering in Singapore, which ended on Tuesday. Silver will gain to $20.90, the survey showed.

•Holdings in exchange-traded funds backed by gold rose to 2,053 metric tons Tuesday, the highest since June 2013.

•Silver increased 0.6 percent, platinum advanced 0.5 percent and palladium climbed 1.1 percent.

Source: Bloomberg