Gold gains due to a subdued dollar
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GOLD PRICES rose on Friday due to a subdued dollar and as investors avoided riskier assets because of China’s Evergrande saga, but looming interest rate hikes slowed bullion’s advance.
Spot gold price was 0.6 percent higher at $1 752.22 (about R25 793) an ounce by 5.07pm but still dipped over the week, while US gold futures eased 0.1 percent to $1 748.20 an ounce.
Although gold recovered some ground after Thursday’s 1 percent fall, Oanda analyst Craig Erlam expected gold to weaken again.
“We’ll see a continuation of the downward trend driven by the Fed’s stance, especially as some of the fears surrounding Evergrande have subsided,” he said.
Gold retreated to a one-month low on Thursday on expectations the US Federal Reserve (Fed) could increase rates. However, a weakening dollar index on Friday offered support, making bullion cheaper for holders of other currencies.
“The Fed has announced that tapering is ahead, the next step is when it’s implemented, that will push real rates even further up, and that should be negative for the gold,” said UBS analyst Giovanni Staunovo, adding it would cause day-to-day volatility.
Cleveland Fed president Loretta Mester said on Friday the central bank should start reducing its support for the economy in November and could start raising interest rates by the end of next year should labour markets continue to improve.
A Fed rate hike would increase the opportunity cost of holding gold, which pays no interest.
Elsewhere, palladium fell 1.3 percent to $1 958.57 an ounce, recording a third consecutive weekly decline.
Platinum slipped 1.6 percent to $973.23 an ounce, although the metal gained on the week after two weekly falls.
Silver lost 1.3 percent to $1 958.57 an ounce.