Gold Price Gains as Dollar Dips Before Fed, Official Sees BOE Stimulus

New York (July 26)  Gold pushed higher as the dollar fell before a Federal Reserve policy meeting and as a Bank of England official said U.K. stimulus is more likely after the economy was hit by a decision to quit the European Union.

Metal for immediate delivery climbed 0.5 percent to $1,321.72 an ounce by 11:06 a.m. in London as the dollar slid against major peers and the BOE’s Martin Weale told the Financial Times that Brexit had rattled the economy more than he expected. The Fed meets today and tomorrow.

Gold often moves in the opposite direction to the U.S. currency, while lower interest rates increase its appeal. Bullion is up 25 percent this year, helped by flows into exchange-traded funds and market turmoil after Britain’s decision to leave the EU.

“There’s a lot of eyes on the central banks at the moment,” said Simona Gambarini, a commodities economist at Capital Economics Ltd. in London. “We don’t expect the Fed to do much at the moment, but we’re likely to see action taken by the Banks of England and Japan.”

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While the Fed will probably keep borrowing costs on hold this week, traders are pricing in odds for a rise by December at 48 percent, up from 15 percent a month ago. A policy statement to be published Wednesday in Washington will probably acknowledge better news on the economy, but fall short of telegraphing that a hike is imminent.

Holdings in gold-backed exchange-traded funds fell 4.5 metric tons to 2,000.5 tons on Monday, data compiled by Bloomberg show. That’s the biggest decline since July 12.

Among other metals:

•Spot silver rose 0.7 percent in London to $19.6885 an ounce.

•Platinum was up 0.4 percent at $1,088.92 an ounce.

•Palladium fell 0.4 percent to $683.57 an ounce.

Source: Bloomberg