Gold extends rally, investment demand returns

Gold futures saw residual buying Thursday morning in the US, spurred higher by the Federal Reserve’s decision to hold-off on lifting interest rates despite a healthy labour market and modest signs of inflation.

Gold for December settlement on the Comex division of the New York Mercantile Exchange rose $11.0 or 0.8 percent to $1,342.20 per ounce. Earlier, the contract touched $1,342.80, around a two-week high.

Federal Reserve chair Janet Yellen at a post-meeting press conference acknowledged the stronger case for a rate rise but noted that it was reasonable to wait to see more progress towards its objectives.

Nevertheless, three FOMC members – Esther George, Loretta Mester and Eric Rosengren – dissented from the statement, an unusually large number, which indicates that policy board is split.

Currently, only 10.3 percent of market participants foresee a rate increase at the FOMC’s November meeting, while the majority – almost 55 percent – anticipate the Fed moving in December, according to the CME Group FedWatch tool.

“A weaker dollar and no hike in rates from the Fed should have given the gold and silver markets a lift, but seeing the Fed also suggest that the US economy had further to run before seeing pressure from inflation would seem to add to the gold bulls’ short term case,” The Hightower Report said.

In paper holdings, exchange-traded-funds (ETF’s) tracked by FastMarkets grew 5.7 tonnes overnight. It’s another indication that investors are optimistic on gold’s prospects moving forward.

The pace of economic data picks up today. US weekly unemployment claims for September 8-15 at 252,000 were below the forecast of 261,000. Later, existing home sales, the HPI, the CB leading index and natural gas storage figures are all slated for release.

Turning to US markets, the Dow Jones industrial average and S&P were up 0.7 percent and 0.6 percent respectively, while the dollar softened 0.7 percent to $1.1251 against the euro.

As for other precious metals, Comex silver for December delivery gained 29.7 cents or 1.5 percent to $20.065 per ounce. Trade has ranged from $19.785 to $20.095.

Platinum for October settlement jumped $18.0 or 1.7 percent to $1,065.90 per ounce, while the most active palladium contract stood at $700.25 per ounce, up $16.35.

(Editing by Tom Jennemann)

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