Gold Recovers as Fed FOMC Doubts Hurt USD

Gold inched up on Monday after a three-day losing streak, as the dollar’s ascent paused and uncertainty persisted over the timing of the first Federal Reserve rate increase in a decade.

Buying interest was kept in check by a rally in global equities, due to an increase in risk appetite after a new round of monetary easing from China on Friday.

Spot gold was up 0.1 percent at $1,164.97 an ounce by 1251 GMT. The metal had dropped to $1,158.77 on Friday, its lowest since Oct. 13, when the dollar soared to its highest level in more than two months.

Gold had risen 1 percent soon after China’s surprise interest rate cut on Friday, as investors bet the U.S. central bank would be compelled to delay a rate rise given the fragility of the global economy. But buying evaporated after upbeat U.S. data increased expectations of a Fed hike this year.

“Concerns about the continuing rally of the dollar created some nervousness and triggered selling on Friday, but sentiment has turned more favourable towards gold, as the timing of the Fed rate hike remains uncertain,” Saxo Bank senior manager Ole Hansen said.

“$1,158 is seen as the next major retracement area. Longs would be fairly resilient as long as we hold above $1,140.”

via Reuters

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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