Gold price rises after steep fall as focus turns to Fed meeting

London (June 8) - Gold rose on Monday, helped by technical buying after the previous session’s steep fall, while investors await the U.S. Federal Reserve’s monetary policy meeting following a surprise rise in employment numbers.

Spot gold rose 0.6% to $1,695.70 an ounce by 1002 GMT. U.S. gold futures climbed 1% to $1,699.90.

“The break below $1,700 on Friday is once again attracting some demand from investors, who have been waiting on the sidelines for a correction,” said Saxo Bank analyst Ole Hansen.

Bullion fell as much as 2.4% to $1,670.14 on Friday, its lowest in a month, after an unexpected rise in U.S. employment data increased hopes for a swift recovery in the global economy and lifted appetite for riskier assets.

Market participants are now waiting for the U.S. Central Bank’s two-day policy meeting, which ends on Wednesday, but have stopped pricing in the possibility of negative interest rates after Friday’s jobs report.

However, Commerzbank analysts expect gold to remain well supported by the wider economic backdrop, which points to zero interest rates for the foreseeable future, as does an inflation rate sitting below the Fed’s target.

Gold tends to gain when interest rates are low, which reduces the opportunity cost of holding bullion. Gold is also seen as a hedge against inflation.

Meanwhile, holdings in the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, dipped 0.4% on Friday. Speculators also cut their bullish positions in COMEX gold in the week to June 2.

In other precious metals, spot silver rose 2% to $17.71 an ounce, palladium slipped by about 0.2% to $1,950.03 and platinum eased 0.2% to $

Reuters

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