Gold edged higher on Thursday, buoyed by a weaker dollar after minutes from the Federal Reserve July policy meeting suggested a rate rise won’t necessarily come any time soon.
The minutes showed US policymakers were divided as to whether to hike interest rates in the near future, a move that would have hurt gold.
A rise in rates would increase the opportunity cost of holding non-yielding commodities like bullion, which don’t offer interest or dividend like other securities.
It would also boost the dollar making the greenback-denominated metal more expensive to foreign currencies, reducing demand.
Analysts aren’t expecting much movement in gold prices until the Fed eases speculation by confirming one way or another what it intends to do with US interest rates.
“Until we have clarity around the US rate hike, gold is going to remain range bound between US$1,320 and US$1,370,” said Hamza Kahn, ING Bank’s senior strategist.
Although a rate rise would do more harm than good for gold, Yuichi Ikemezi, head of commodity trading at Standard Bank in Tokyo, says there are more supportive factors than just the dovish tone of the Fed.
“Nobody would be willing to sell gold aggressively even if there is a hike in rates, with the US presidential elections in November creating uncertainty.”
Gold on verge of ‘biggest bull market ever’
Gold has enjoyed a formidable rise in 2016 which has made it one of the top performing assets so far this year.
Despite the recent price surge, market analyst Peter Grandich, dubbed the ‘The Wall Street Whizz Kid’, believes this could just be the start for gold as he tips it to take off in the near future.
“The bullish fundamentals for gold grow almost daily,” explains Grandich.
“I personally believe gold is in the earliest stages of what can turn out to be its biggest bull market ever.”
He expects the price of the yellow metal to go “much, much higher”, and says we’re at a break out point, “where if and when it occurs, an acceleration to the upside will take place.”
Elsewhere in the world of precious metals, platinum and silver both recorded gains after hitting three-week lows yesterday.
Shortly before London close, gold was up US$1 to US$1,350, silver was up 7c to US$19.75 and platinum was also up US$9 to trade at US$1,123.