Gold rose the most in two weeks as the dollar tumbled against the yen and traders reacted to remarks from policymakers on the Federal Reserve’s interest-rate path.
Spot bullion surged as much as 2.6%, the biggest intraday increase since Aug. 19, as the yen extended its strengthen against the greenback. Meanwhile, Federal Reserve Governor Christopher Waller said he expects “reasonable” inflation prints next month, prompting traders to pare back their bets on rate hikes by the US central bank this year. Lower rates are generally positive for non-yielding gold.
“Gold is seeing a strong rebound, which was already underway before Fed Governor Christopher Waller came to the rescue by helping lower bond yields and reducing market expectations for a September rate hike,” said Ole Hansen, head of commodity strategy at Saxo Bank. “Before his comments, gold was already moving higher, supported by a weaker dollar, not least against the Japanese yen.”
Gold’s recent moves have been dictated largely by shifting expectations for the Fed’s next steps. It fell for three straight sessions after Chair Kevin Warsh reiterated his commitment to fighting inflation in a hawkish speech Friday, fueling bets on higher interest rates. Elevated energy prices amid renewed tensions in the Middle East have also kept expectations for further tightening alive.
Traders are now eyeing Friday’s payrolls report and inflation data due next week, which may provide fresh cues on where monetary policy may go.
Gold is slightly higher this year following a volatile run of trading, setting a record in January before a four-month slump through to June. Prices then rebounded as investors tracked the conflict in the Middle East and sought to gauge whether the Fed would need to tighten policy. Signs of continued central-bank buying have also aided the precious metal.
“With hike pricing remaining elevated amid lingering inflation concerns, timing remains the main question for the next leg higher in the yellow metal,” said Ryan McKay, senior commodity strategist at TD Securities.
Spot gold rose 1.9% to $4,462.90 an ounce at 10:09 a.m. in New York. Silver was up 1.4%, while platinum and palladium also advanced. The Bloomberg Dollar Spot Index, a gauge of the US currency, fell 0.5%.
(By Yvonne Yue Li)
