Gold jumps 1pc as Fed stance compounds growth worries

Gold jumps 1pc as Fed stance compounds growth worries

Gold jumps 1pc as Fed stance compounds growth worries

Gold prices held steady near a five-month peak hit early on Monday, supported by a disappointing USA jobs report that fuelled speculation that the Federal Reserve may stop raising interest rates sooner than expected.

The most active gold contract for February delivery fell 9.80 US dollars, or 0.77 percent, to settle at 1,258.10 dollars per ounce.

In a widely anticipated decision, the USA central bank hiked interest rates by 25 basis points on Wednesday.

"Maxwell Gold, director of investment strategy at Aberdeen Standard Investments, said that growing uncertainty in financial markets could force the Federal Reserve to slow down tightening of monetary policy next year", reports Kitco News.

With the Fed under pressure to ease its tightening trajectory, gold could benefit in 2019 if the US central bank obliges.

"There is some safe-haven buying supporting gold prices today", said Renisha Chainani, head of commodity and currency research at Monarch Networth Capital. Lower interest rates also tend to weigh on United States yields and the dollar, in which gold is priced.

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The dollar was steady in Asian trade, managing to recover from the previous session's low as markets came to terms with the Fed's outlook.

Investors seem concerned with the fact that the Fed is signaling further rate hikes despite such unfavorable market conditions and lower economic growth forecasts for 2019.

"In his latest report, Gold said that his base case is for gold prices to trade in a range between $1,275 and $1,325 in the next 12 months; however, he added that there is a growing probability that the firm's bull-case scenario comes to fruition, which would see gold prices trade between $1,375 and $1,425, according to Kitco".

On Wednesday, Powell acknowledged that the Fed had initially over-promised on rate hikes for 2016, underpromised on them for 2018, and only got it right once, in 2017.

Speaking later on Thursday, U.S. Treasury Secretary Steven Mnuchin suggested the Fed may not even go through with the rate hikes that have driven markets to their "completely overblown" reaction.

As investors flocked to the safety of government bonds, U.S. benchmark Treasury yields fell to more than eight-month lows on Wednesday. Among other precious metals, palladium treaded down 0.8 percent to $1,250.50 per ounce, having hit a record high of $1,283.49 in the previous session. Silver fell 0.2 per cent to $14.57 per ounce, while platinum declined 0.2 per cent to $784.50 per ounce.

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