Gold prices lift as US Fed eyed

London (Oct 12)  Gold prices were higher on the London spot market on Monday morning, as speculation over a delay in raising interest rates by the US Federal Reserve and a weaker dollar continued to give the yellow metal a boost.

Spot gold was trading up 0.77 per cent at $US1,164.80 a troy ounce in morning European trade, having hit a seven-week high on Friday to close at $US1,155.90 a troy ounce.

Gold prices have risen on improving sentiment that the Fed will not raise the key interest rate this year. Minutes from the September meeting released on Thursday showed officials' concern about the impact of an economic slowdown in China, as well as low inflation.

Because gold does not bear interest, it is generally more attractive to investors when rates are pinned near zero. Should yields rise, yield-bearing assets, like Treasury bills, would likely become more attractive to investors.

Meanwhile, the US dollar was down 0.20 per cent Monday morning, according to the WSJ Dollar Index. Gold is denominated in dollars, and becomes less expensive for investors who have access to stronger currencies.

The gains this morning have come alongside improvements in the broad financial markets, according to analysts. The increase in gold prices could lead to momentum buying, according to Commerzbank.

"With the price increases of the past two weeks, the technical picture for gold has brightened noticeably," the German bank said in a note. "If it were able to exceed its August high, we could see technical follow-up buying."

Meanwhile, possible strike-action by the second-largest gold mining union in South Africa is also pushing up gold prices, according to analysts.

"It's not that significant for supply, bit it adds to the general sentiment," said Simona Gambarini, a commodities economist at Capital Economics.

Meanwhile, economic numbers from China, including trade balance numbers, are expected this week. This could give further direction to prices, analysts say.

All the other precious metals are higher Monday morning. Spot silver was up 1.15 per cent at $US16.00 an ounce, spot platinum was up 1.19 per cent at $US993.10 an ounce and spot palladium was up 0.74 per cent at $US713.40 an ounce.