Gold climbed on Friday, recovering from Thursday’s drop, as the US dollar sank with investors weighing the impact of the US Federal Reserve’s new approach to setting monetary policy.
The metal rose the most in almost two weeks and the US dollar touched a two-year low a day after Fed Chairman Jerome Powell said that the central bank would seek inflation that averages 2 percent over time.
His comments sent bullion on a roller-coaster ride in the previous session, as he signaled the central bank would stay accommodative for longer, with a more tolerant approach on inflation, but would not hesitate to act if consumer prices rise considerably above its goals.
Photo: Bloomberg
Gold on Friday strengthened due to “a more measured appraisal of the shift in Fed nuances, along with a weakening dollar, for the same reason,” Rhona O’Connell, head of market analysis for EMEA and Asia regions at StoneX Group, said in an e-mailed note.
Higher inflation tolerance and low interest rates should see US real yields fall in the medium-to-longer term, which is supportive for gold, said Vivek Dhar, an analyst at the Commonwealth Bank of Australia.
Still, the fact that the Fed would also act if there are inflationary pressures adds doubt to how high US 10-year inflation expectations can reach, he said.
PRICES
Spot gold rose 1.98 percent to US$1,967.11 an ounce, up 1.45 percent for the week — its first weekly gain in three weeks.
The metal is down more than US$100 from a record set earlier this month as risk-on sentiment improved, but it is still one of the best-performing commodities this year after the COVID-19 crisis and massive stimulus measures boosted demand for havens.
Gold futures for December delivery rose 2.2 percent to settle at US$1,974.90.
The Bloomberg Dollar Spot Index dropped 0.9 percent to the lowest since May 2018, while US equities rose.
Economic confidence in the euro area continued to improve this month, data showed on Friday, but job cuts in the past few months across the continent mean consumers remain worried about the labor market.
In the US, the rebound in consumer spending slowed last month as virus cases rose in some states.
NO THREAT
The Fed’s shift to let inflation and employment run higher might signal that policy makers will keep interest rates low for years to come, lifting the appeal of non-interest-bearing gold. There is still room for bullion to set new all-time highs, although that could take time, said Ole Hansen, head of commodity strategy at Saxo Bank A/S.
Powell’s “speech did not threaten the bullish narrative for gold and silver,” Hansen said. “Low interest rates for longer, a weaker dollar, massive amounts of stimulus and the increased demand for inflation hedges are likely to continue to drive demand for both metals.”
The biggest risk to gold remains the discovery of a vaccine and a sharp correction in stocks, which would spark a drive to raise cash, he said.
Additional reporting by Reuters
KEEPING UP: The acquisition of a cleanroom in Taiwan would enable Micron to increase production in a market where demand continues to outpace supply, a Micron official said Micron Technology Inc has signed a letter of intent to buy a fabrication site in Taiwan from Powerchip Semiconductor Manufacturing Corp (力積電) for US$1.8 billion to expand its production of memory chips. Micron would take control of the P5 site in Miaoli County’s Tongluo Township (銅鑼) and plans to ramp up DRAM production in phases after the transaction closes in the second quarter, the company said in a statement on Saturday. The acquisition includes an existing 12 inch fab cleanroom of 27,871m2 and would further position Micron to address growing global demand for memory solutions, the company said. Micron expects the transaction to
Vincent Wei led fellow Singaporean farmers around an empty Malaysian plot, laying out plans for a greenhouse and rows of leafy vegetables. What he pitched was not just space for crops, but a lifeline for growers struggling to make ends meet in a city-state with high prices and little vacant land. The future agriculture hub is part of a joint special economic zone launched last year by the two neighbors, expected to cost US$123 million and produce 10,000 tonnes of fresh produce annually. It is attracting Singaporean farmers with promises of cheaper land, labor and energy just over the border.
US actor Matthew McConaughey has filed recordings of his image and voice with US patent authorities to protect them from unauthorized usage by artificial intelligence (AI) platforms, a representative said earlier this week. Several video clips and audio recordings were registered by the commercial arm of the Just Keep Livin’ Foundation, a non-profit created by the Oscar-winning actor and his wife, Camila, according to the US Patent and Trademark Office database. Many artists are increasingly concerned about the uncontrolled use of their image via generative AI since the rollout of ChatGPT and other AI-powered tools. Several US states have adopted
A proposed billionaires’ tax in California has ignited a political uproar in Silicon Valley, with tech titans threatening to leave the state while California Governor Gavin Newsom of the Democratic Party maneuvers to defeat a levy that he fears would lead to an exodus of wealth. A technology mecca, California has more billionaires than any other US state — a few hundred, by some estimates. About half its personal income tax revenue, a financial backbone in the nearly US$350 billion budget, comes from the top 1 percent of earners. A large healthcare union is attempting to place a proposal before
RSS