August 17, 2016
Gold Holds Advance Even as Fed Officials Flag Possible Rate Rise
(Bloomberg) - Gold held a two-day gain before the release of the Federal Reserve’s minutes of its July meeting as investors weigh comments from central bank officials who signaled that interest rates could be increased at least once this year.
Bullion for immediate delivery traded at $1,344.96 an ounce at 12:24 p.m. in Singapore from $1,346.24 on Tuesday, according to Bloomberg generic pricing. The metal is 27 percent higher this year.
Gold has advanced this year as the Fed has yet to add to last year’s rise, which was the first in almost a decade. New York Fed President William Dudley warned investors they are underestimating the likelihood of increases, while Atlanta Fed chief Dennis Lockhart said he’s confident growth is accelerating, setting the stage for one or two rises this year. While the comments boosted the probability of a hike in December to 51 percent, gold rose and the dollar fell on Tuesday.
“Gold has remained supported despite hawkish comments from Fed’s Dudley,” Bryan Lum, a Singapore-based strategist with Phillip Futures Pte, said in an e-mail. “While he suggested that a September rate hike was possible, the disappointing economic data released over the past few days has the market unconvinced.”
“With recent retail sales and CPI data falling below expectations, it appears that the economy may not be fully on track for recovery,” Lum said. “Given a soft U.S. dollar and wavering outlook, gold traders have enough reason to remain bullish and look upon dips as opportunities for bargains.”
The minutes of the Fed’s policy meeting due are for release Wednesday at 2 p.m. in Washington. Stagnant retail-sales data on Aug. 12 cast doubt about the strength of the U.S. recovery. The Fed’s preferred measure of inflation, which has been below the central bank’s 2 percent target for four years, has been slow to pick up.
Holdings in bullion-backed ETPs added 5.25 metric tons to 2,032.9 tons on Tuesday, data compiled by Bloomberg show.
In China, bullion of 99.99 percent purity fell 0.2 percent to 287.50 yuan a gram ($1,348.66 an ounce) on the Shanghai Gold Exchange.
On the Shanghai Futures Exchange, gold for December delivery lost 0.3 percent to 288.05 yuan a gram, while silver dropped 0.6 percent to 4,382 yuan a kilogram.
Silver rose 0.3 percent, platinum climbed 0.1 percent and palladium declined 0.5 percent.