Gold rebounds from biggest weekly loss this year

27/02/2018 06:03 AST

Gold rose on Monday as a softer dollar helped the metal rebound from its biggest weekly loss this year, but moves were muted before the debut congressional testimony by Federal Reserve Chair Jerome Powell later this week. Powell’s appearance will be closely watched for clues on the outlook for US monetary policy.

The dollar index slid 0.1 per cent on Monday, lifting gold after it fell 1.4 per cent last week, its biggest weekly drop in 2-1/2 months. Spot gold was up 0.4 per cent at $1,333.74 an ounce at 1503 GMT, while US gold futures for April delivery were up $4.90 an ounce at $1,335.20.

“What’s been most interesting this year is the breakdown of what gold is tracking most closely, and that has been the US dollar,” Standard Chartered analyst Suki Cooper said, adding that underlying investment interest has been muted.

“My main concern with the price run-up that we’ve seen this year is that it hasn’t been accompanied by broad investment demand,” she said. “To really breach that $1,360-1,375 level, we need the US retail investor on board as well.” Nominally higher-risk assets were buoyant on Monday, with European stocks up 0.5 per cent as investors bet Powell will flag up an intention to steer a steady course on US monetary policy when he addresses lawmakers this week. That view weighed on US 10-year Treasury yields, dragging down the dollar.

The Fed, looking past a recent stock market sell-off and concern about inflation, said on Friday it sees steady growth continuing and no serious risks on the horizon that might pause its planned pace of rate hikes. Gold is highly sensitive to rising US interest rates, which increase the opportunity cost of holding non-yielding bullion and strengthen the dollar, in which it is priced.

The heads of the European Central Bank and Bank of England are also set to give speeches this week. Fresh physical demand from China after the end of the week-long Lunar New Year holiday also supported gold, traders said. “With the yellow metal trading around $25 lower than it was when Shanghai closed for the Lunar New Year holiday, participants wasted no time bidding up the metal through mild resistance at $1,330,” MKS said in a note.

The Gulf Today