Gold Rises as Fed Rate Speculation Pushed Back

Gold rose to the highest in more than five weeks in New York as traders pushed back estimates for when the U.S. Federal Reserve will raise interest rates and on concern the dollar will weaken.

Futures traders put the odds of a U.S. rate increase at 48 percent by October 2015, down from 50 percent at the end of last week. Holdings in gold-backed funds slipped to a five-year low yesterday. The Bloomberg Dollar Spot Index was little changed after reaching the lowest level in almost a week earlier today.

Gold had erased this year’s gains earlier this month as an improving U.S. economy added to the case for higher borrowing costs. Bullion has since rebounded as the dollar fell from a four-year high on speculation slowing global growth may prompt the Fed to delay raising rates. Higher rates cut gold’s allure because it generally only offers investors returns through price gains.

“A more dovish Fed view would be interpreted as gold friendly,” James Steel, an analyst at HSBC Securities (USA) Inc., wrote in a report. “The prospect for a weaker U.S. dollar near-term may provide support for bullion.”

Gold for December delivery rose 0.4 percent to $1,249.70 an ounce by 7:42 a.m. on the Comex in New York. It reached $1,254.10, the highest since Sept. 10. Gold for immediate delivery added 0.2 percent to $1,249.54 in London, according to Bloomberg generic pricing.

Futures trading volume was 37 percent above the average for the past 100 days for this time of day, data compiled by Bloomberg show.

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