Reuters has posted by Gold rises on weak dollar, set for third week of gains Gold rose more
than 1 percent on Friday, supported by a softer dollar and cautious
interest rate comments by a voting U.S. Federal Reserve policy member,
and was headed for a third week of gains.
The
U.S. dollar .DXY made its biggest drop against a basket of major
currencies in two weeks, making dollar-denominated assets such as gold
cheaper for holders of other currencies. [USD/]
Spot
gold XAU= was up 1.2 percent at $1,293.80 an ounce at 3:02 p.m. EDT
(1902 GMT). Bullion has risen 1.5 percent so far this week.
U.S.
gold for August delivery GCcv1 settled down 0.3 percent at $1,294.80 an
ounce, well below Thursday's peak of $1,315.55, the highest since
August 2014.
"Gold is reverting to
its safe-haven role, in a situation where euro zone government bonds are
in negative yield territory and investors have fewer safe assets to
choose from," Mitsubishi Corp strategist Jonathan Butler said.
St.
Louis Fed President James Bullard said the central bank's "dot plot" of
projected interest rate policy "appears to be too steep."
"Fed funds futures
markets do not seem to believe it. They are priced for a much shallower
pace of increases," Bullard said, arguing that the central bank may need
to only increase rates once between now and the end of 2018.
Gold is highly sensitive to rising interest rates, which lift the opportunity cost of holding the precious metal.
"His comments were clearly bullish," said Bill O'Neill, co-founder of commodities investment firm Logic Advisors.
"A July rate hike is virtually out of the question. I think gold is looking at that."
Traders
said that market dealings could be volatile next week ahead of the June
23 referendum when Britain will vote on whether to remain in the
European Union or to leave.
The
Bank of England escalated its warnings about fallout from the vote,
saying it could harm the global economy and that sterling looked
increasingly likely to weaken further if "Leave" wins.
"Over the next week
until the British referendum, there could be a further upward move in
gold ... as investors will use it as a hedge against various financial
risks," Commerzbank analyst Daniel Briesemann said.
Reflecting renewed optimism towards gold, holdings in SPDR Gold Trust (GLD),
the world's largest gold-backed exchange-traded fund, rose to 902.53
tonnes on Thursday, the highest since October 2013. [GOL/ETF]
Silver XAG= rose 1.8 percent to $17.44 an ounce after falling 2 percent on Thursday.
Platinum XPT= rose 0.3 percent to $967.50 and palladium XPD= fell 0.3 percent to reach $529.75.
(Additional reporting by Vijaykumar Vedala in Bengaluru; Editing by Meredith Mazzilli)