Gold Near Two Month High on Iraq and Fed Outcome

Gold futures traded below a two-month high as investors weighed the outlook for U.S. borrowing costs to remain low and tension in Iraq against signs of weaker physical demand. Platinum and palladium declined.

Gold capped a third successive weekly advance last week after the Federal Reserve said it will keep interest rates at almost zero for a considerable time. The metal’s 12-year bull run ended in 2013 on expectations that the Fed would scale back stimulus as the economy strengthened.

Bullion is set for its first back-to-back quarterly gain since 2011, in part as escalating violence in Iraq and tension between Ukraine and Russia boosted haven demand. Militants in Iraq seized more territory and U.S. President Barack Obama warned that the crisis may spill over into other countries. There’s still “little physical interest,” Australia & New Zealand Banking Group Ltd. wrote in a report today.

The metal gained “on the back of rising tension in Iraq, dovish remarks by Fed Chair Janet Yellen” and technical-related buying, Abhishek Chinchalkar, an analyst at Mumbai-based AnandRathi Commodities Ltd., said in a report today. Demand from China is “unlikely to pick up any time soon. We expect gold to face strong hurdles in sustaining these recent gains.”

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