Gold rose 1% on Friday, on course for its first weekly gain in three, as the dollar retreated and the U.S. Federal Reserve’s stance reinforced expectations of a prolonged low interest rate environment.
Spot gold was up 1.6% to $1,958.88 per ounce by 0941 GMT, gaining nearly 1% so far this week. U.S. gold futures rose 1.8% to $1,967.40.
Fed Chairman Jerome Powell on Thursday said the central bank would adopt an average inflation target – meaning rates are likely to stay low even if inflation rises a bit in future. [nL1N2FT0PR]
The dollar index fell 0.7% en route to its worst week in a month, rendering gold cheaper for investors holding other currencies.
Apart from the dollar, “political uncertainty around the resignation of the Japanese prime minister is also supporting gold to some extent,” said Quantitative Commodity Research analyst Peter Fertig.
The Fed’s stance evoked a mixed response in global equities, while PM Shinzo Abe’s resignation for health reasons weighed on Japanese markets.
Silver, meanwhile, gained 1.7 % to $27.51 per ounce, on track for a second consecutive weekly rise, up 3.2%.
“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,” said Saxo Bank analyst Ole Hansen.
Fading hopes of a quick economic recovery amid the COVID-19 pandemic have compelled central banks to take an accommodative monetary policy stance, helping gold gain 28% this year, since lower interest rates decrease the opportunity cost of holding non-yielding bullion.
“The one event we’re looking at is the U.S. elections. If (Donald) Trump loses and declines to accept the results to stay in the White House till January, that will be very positive for gold,” QCR’s Fertig added.
Platinum rose 0.2% to $930.46 an ounce, while palladium climbed 0.3% to $2,167.23.
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