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Gold bounces from multi-year low as weak dollar sparks rebound

PROSPECTING GOLD
AP

Gold rose 1 percent on Thursday, rebounding from near six-year lows as indications from the U.S. Federal Reserve that it may move cautiously into the rate hiking cycle weighed on the dollar and prompted investors to cover short positions.

Fed officials on Wednesday continued to flag December as a likely time for U.S. interest rates to rise after seven years near zero, but the central bank signaled an intention to proceed slowly and steadily after that.

Rising rates tend to weigh on gold, as they lift the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced. Expectations that rates will rise have pushed gold prices down 9 percent this year.

Spot gold was up 1 percent at $1,082.40 an ounce, after rising as much as 1.5 percent to $1,086.10. The metal hit its weakest since February 2010 on Wednesday at $1,064.85.

U.S. gold futures for December delivery settled up 0.9 percent at $1,077.90.

"It was a consolidation (day) and certainly with the dollar weakening, that took one of gold's biggest burdens away," said Bill O'Neill, co-founder of commodities investment firm Logic Advisors in New Jersey.

"It's a case of sell the rumor, buy the news today. This certainly shouldn't be taken as a signal that the market's bottomed."

Gold prices pared gains after Atlanta Fed President Dennis Lockhart said the central bank may be heading for a "slow ... halting" effort to raise rates after it begins its first tightening cycle in about a decade.

"I think this is pre-Thanksgiving week short-covering which has its roots in the Fed minutes yesterday," Simon Weeks, head of precious metals at the Bank of Nova Scotia, said.

"(These) basically still imply a December hike, but they changed the wording slightly. That has made people think it might not be such a one-way bet after all."

The dollar fell against most other major currencies, with some analysts arguing that it will now take more than next month's expected action on U.S. monetary policy to drive it higher.

Key stock markets in Europe and Asia rallied, while U.S. stock indexes were little changed.

Silver was up 0.4 percent at $14.23 an ounce.

Platinum was up 0.5 percent at $851.49 an ounce, recovering from Wednesday's seven-year low reached despite an expected deficit this year.

Palladium was up 0.8 percent at $537.60 an ounce after falling to the lowest since late-August at $523.35.