LONDON: Gold steadied yesterday after a rally to six-week highs ran out of steam, but it remained on track for the biggest weekly rise since mid-January as more bad economic data from China battered financial markets.
World stocks tumbled towards their worst week of the year, while the dollar index fell to its lowest in nearly eight weeks after the China factory report added to doubts that the Federal Reserve will be able to raise interest rates next month.
Gold had already rebounded this week from July’s 5-1/2 year low, boosted by minutes of the Fed’s last policy meeting, which dented expectations for an imminent rise in US rates.
Spot gold hit a peak of $1,168.40 an ounce and was at $1,153.42 at 1200 GMT, little changed from late on Thursday and up 3.5 percent on the week. US gold futures for December delivery were down 30 cents at $1,152.90.
“Everyone’s following the Fed, effectively,” Natixis analyst Bernard Dahdah said. “A September hike is seen as less likely than it was a week ago ... If you look at the interest rate probability according to the Fed fund futures, on August 13 it was showing 50 percent for September and now it’s down to 32 percent.”
“The latest move is related to disappointment in that, and the dollar has weakened, which is related to China.”
The weak factory data sent the dollar to its lowest in almost eight weeks against a basket of major currencies yesterday.
Gold has come under heavy pressure this year from expectations that the Fed would raise rates for the first time in nearly a decade, lifting the opportunity cost of holding non-yielding bullion while boosting the dollar.
Appetite for risk was further dented in Europe after Greek Prime Minister Alexis Tsipras resigned on Thursday.
“Risk aversion is rising again in financial markets, weighing on equities and in turn lifting gold,” Julius Baer said in a note.
REUTERS
LONDON: Gold steadied yesterday after a rally to six-week highs ran out of steam, but it remained on track for the biggest weekly rise since mid-January as more bad economic data from China battered financial markets.
World stocks tumbled towards their worst week of the year, while the dollar index fell to its lowest in nearly eight weeks after the China factory report added to doubts that the Federal Reserve will be able to raise interest rates next month.
Gold had already rebounded this week from July’s 5-1/2 year low, boosted by minutes of the Fed’s last policy meeting, which dented expectations for an imminent rise in US rates.
Spot gold hit a peak of $1,168.40 an ounce and was at $1,153.42 at 1200 GMT, little changed from late on Thursday and up 3.5 percent on the week. US gold futures for December delivery were down 30 cents at $1,152.90.
“Everyone’s following the Fed, effectively,” Natixis analyst Bernard Dahdah said. “A September hike is seen as less likely than it was a week ago ... If you look at the interest rate probability according to the Fed fund futures, on August 13 it was showing 50 percent for September and now it’s down to 32 percent.”
“The latest move is related to disappointment in that, and the dollar has weakened, which is related to China.”
The weak factory data sent the dollar to its lowest in almost eight weeks against a basket of major currencies yesterday.
Gold has come under heavy pressure this year from expectations that the Fed would raise rates for the first time in nearly a decade, lifting the opportunity cost of holding non-yielding bullion while boosting the dollar.
Appetite for risk was further dented in Europe after Greek Prime Minister Alexis Tsipras resigned on Thursday.
“Risk aversion is rising again in financial markets, weighing on equities and in turn lifting gold,” Julius Baer said in a note.
REUTERS
