Gold Rebounds After Dovish Minutes

Gold climbed to the highest in more than two weeks in New York as the dollar weakened after the Federal Reserve said it was concerned slowing global growth risked damping the recovery. Silver advanced.

Minutes released yesterday from the Federal Open Market Committee’s Sept. 16-17 meeting showed a number of participants said the nation’s expansion “might be slower than they expected if foreign economic growth came in weaker than anticipated.” The Bloomberg Dollar Spot Index reached a two-week low today.

Gold rebounded from this year’s low set Oct. 6 as investors pushed back bets for when the Fed will raise interest rates and Chinese consumers returned from a week-long holiday. The metal had erased gains for the year last week as an improving U.S. economy added to the case for higher borrowing costs. Rising interest rates reduce gold’s allure because the metal generally only offers investors returns through price gains, while a stronger dollar typically cuts demand for a store of value.

“The dovish FOMC minutes have created a friendlier environment for gold,” analysts at UBS AG wrote in a report today. “Fed concerns about a stronger U.S. dollar and global slowdown as risks to the U.S. outlook have encouraged gold buyers to emerge. The move has been enabled by quite decent physical demand from the return of Chinese participants.”

Gold for December delivery climbed as much as 2.3 percent to $1,234 an ounce, the highest since Sept. 23, and was at $1,231.90 by 8:16 a.m. on the Comex in New York. Gold for immediate delivery added 0.9 percent to $1,231.65.

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza