Gold Precious metal hovers near 3-week high as equities slip

"Buying appeared to be a combination of safe-haven demand and fresh short covering," he said.

  • Published:
Gold hovers near 3-week high as equities slip play

Gold hovers near 3-week high as equities slip

(Reuters)
24/7 Live - Subscribe to the Pulse Newsletter!

Gold held close to its highest level in nearly three weeks on Monday, boosted by safe-haven demand after the Federal Reserve's move last week to leave U.S. interest rates unchanged weighed on global equities.

Spot gold was steady at $1,138.90 an ounce by 0640 GMT, after gaining 3 percent in the previous three sessions. Trading liquidity was thin during Asian hours due to a three-day holiday in Japan.

The metal had climbed to $1,141.50 in the previous session, its highest since Sept. 2.

Asian shares followed Wall Street lower on Monday after the Fed's decision to keep interest rates at record lows raised fresh concerns about growth globally, particularly in China. U.S. and European debt yields also tumbled.

"The retreat in equities plus the continued decline in U.S Treasury yields helped encourage buying in gold," said HSBC analyst James Steel.

"Buying appeared to be a combination of safe-haven demand and fresh short covering," he said.

The Fed kept interest rates unchanged last week in a bow to worries about the global economy, financial market volatility and sluggish inflation at home. It left open the possibility of modest rate rises later this year.

With the Fed having sounded a cautious tone on the health of the global economy, the focus this week will likely turn to China and the flash PMI report on Wednesday.

The decision to not hike rates last week is positive for non-interest-paying gold, which could see demand drop with higher rates. Bullion prices have dropped about 4 percent this year on uncertainty over the timing of a rate hike.

But with the Fed expected to hike rates before the end of the year, gold could come under pressure again.

An interest rate hike will likely be appropriate this year given the U.S. central bank's decision last week to stand pat was a "close call," Fed policymaker John Williams said on Saturday.

A stronger dollar could also limit gold's gains. The dollar edged higher against a basket of major currencies on Monday, recovering from last week's losses after the Fed kept rates on hold. [USD/]

Hedge funds and money managers slashed their net long position in COMEX gold to a five-week low in the week ended Sept. 15, just before the Fed policy meet, while increasing their short positions, U.S. Commodity Futures Trading Commission data showed on Friday.

Do you ever witness news or have a story that should be featured on Pulse Nigeria?
Submit your stories, pictures and videos to us now via WhatsApp: +2349055172167, Social Media @pulsenigeria247: #PulseEyewitness & DM or Email: eyewitness@pulse.ng. More information here.