Gold prices up nearly 2% on Fed’s dovish tone

London (Jun 18)  Gold futures drove higher Thursday, helped by a pullback in the U.S. dollar as the Federal Reserve signaled it will raise interest rates at a gradual pace.

Gold for August delivery GCQ5, +1.89%  climbed $20.30, or 1.7%, to $1,196 an ounce on Comex. Prices began climbing in electronic trade Wednesday as the Fed indicated that while it expects its benchmark fed funds interest rate to eventually rise to 3.75% in the “longer run,” the likely path to that level will be slow.

The Fed’s view pressured the U.S. dollar, which tends to benefit from higher interest rates. The ICE U.S. Dollar Index DXY, -0.56% dropped 0.6% to 93.77, around its lowest level since mid-May. In turn, dollar-denominated commodities such as gold found support from the dollar’s decline. 

The central bank’s first rate hike since 2006 may take place in September, but until then “the gold price is unlikely in our opinion to make any significant gains because of the uncertainty surrounding this question,” said commodities analysts at Commerzbank in a note.

“What is more, the currently weak investment demand and subdued physical demand are likely to prevent gold rising lastingly above the $1,200 per troy ounce mark again,” they said.

Gold prices ahead of the Fed’s statement on Wednesday fell $4.10, or 0.4%.

Other metals prices advanced Thursday, with July silver SIN5, +2.09%  up 30 cents, or 1.9%, at $16.24 an ounce. July platinum PLN5, +2.05% charged up $20.80, or 1.9%, to $1,093.50 an ounce, while September palladium PAU5, +0.37%  picked up $2.90, or 0.4%, to $723.25 an ounce.

July copper HGN5, +0.85%  rose 2 cents, or 0.7%, to $2.637 a pound.

Source: MarketWatch