Fed Holds Back, Gold Makes a Roll

After the Federal Reserve left its interest rates unchanged, gold makes for its biggest weekly advance in nearly two months.

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Spot gold dropped 0.2 per cent to $1,334.41 an ounce by 0411 GMT and traded with modest change at $1,336.72 an ounce at 11:05 a.m. in London after reaching fourth-day rally on Thursday, as reported by Bloomberg generic pricing. The metal went back on track as it climbed 2 percent this week, the highest since the period to July 29, as the greenback slid against competitors and investors opted for holdings in bullion-backed exchange-traded funds.

Silver, platinum, and palladium rallied for the week with silver posting a weekly gain of 5 percent in more than two months, although it fell at 0.6% to $19.72. Platinum edged up the market with 0.3 percent at $1,054.20 today, gaining as much as 1.7 percent in the previous session. Palladium slid 0.5 percent at $690.20, after a 1.5 percent gain on Thursday.

The last time prices rose to a record was in 2011, and gold is expected to hit a Q3 gain in what can be considered as the longest rally since the said year. As Fed holds fire in tightening policy, and Bank of Japan shifts its focus to targeting yield curves, bets on European policy makers keeping their easing stance remain. Gold is becoming an attractive store of value as central banks try to excite weak economic growth by maintaining low or negative rates and asset purchases.

“The inaction by the Fed revived investor appetite for gold,” the Australia & New Zealand Banking Group Ltd. said in a written note. “While a cut in the Fed’s outlook for rates and the weaker U.S. dollar no doubt played a part, the continued efforts by Bank of Japan to bolster economic stimulus also helped.”

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Tracked by the Bloomberg Dollar Spot Index, the currency lost 0.8 percent against major peers this week. From a June median projection of three, Fed now sees only two possible hikes for next year while hinting a year-end raise for 2016.

Increase of gold assets in ETFs has been reported every month this year except for a less than 1 percent loss in April. They have the highest expansion in more than two weeks by about 7 metric tons to almost 2,031 tons, as shown by Bloomberg’s compiled data after the Federal Reserve’s decision was announced.

SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, raised holdings at 0.69 percent to 950.92 tons, for a second straight session on Thursday.

US gold futures slipped 0.5 per cent to $1,338.20 an ounce.

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