The price of gold rose to a six-month high on Monday, buoyed by growing conviction among investors that the US Federal Reserve has finished raising interest rates, and a weaker dollar. Spot gold prices rose 0.6 per cent to $2,014.55 per troy ounce, the highest level since mid-May. The move took the precious metal’s gains since hitting a seven-month low at the start of October to just over 10 percent, and left it around 3 percent below its all-time high reached in August 2020. It later fell back to trade at around $2,010.
Gold’s ascent has been supported by a sliding dollar, which has declined about 3 percent against a basket of six peers in November, meaning that buying the precious metal is cheaper for investors holding other currencies. Soft economic data in the US has also strengthened expectations that interest rates will not rise any further this year and will be cut next year. Yields on rate-sensitive two-year Treasuries have fallen from 5.2 percent — their highest level since 2006 — in mid-October to 4.94 percent. Gold does not pay any income and therefore looks relatively less attractive when rates are high, but more attractive when rates fall. “The US rate outlook is the key driver for gold,” said Ewa Manthey, commodities strategist at Dutch bank ING. “Lower rates are typically constructive for gold, because it doesn’t yield any interest.”
Source: Financial Times