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Futures & Commodities

Gold jumps after weak data releases, Fed minutes

Key Points
  • Weak U.S. data pushes dollar, U.S. bond yields lower.
  • U.S. Treasury yield curve flattest in a decade.
A worker holds a gold bullion at Istanbul Gold Refinery in Istanbul, Turkey.
Ozan Kose | AFP | Getty Images

Gold prices shot up on Wednesday as weaker-than-expected U.S. data pushed the dollar lower. Investors also digested the release of a summary from the Fed's latest meeting.

Spot gold was up 1.02 percent at $1,293.47 an ounce at 3:10 p.m. ET, while U.S. gold futures for December delivery were 0.91 percent higher at $1,293.40 an ounce.

Federal Reserve officials on Wednesday indicated positive views on economic growth, but were more cautious when evaluating market conditions.

Outgoing Fed Chair Janet Yellen said rates should rise gradually but warned she was "very uncertain" that inflation would soon rebound, suggesting a cautious approach to rate increases.

Already down on the day, the dollar weakened further after data showed new orders for key U.S.-made capital goods unexpectedly declined in October. U.S. bond yields also fell.

Gold is sensitive to rising rates because they tend to boost the dollar, making gold more expensive for holders of other currencies, and push up bond yields, reducing the appeal of non-yielding gold.

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Gold has benefited from a flattening in the U.S. Treasury yield curve that has supported the Japanese yen and pushed the dollar lower, Saxo Bank analyst Ole Hansen said.

The U.S. yield curve hit the lowest in a decade on Tuesday on expectations that the Fed will raise rates, inflation will remain low, and government will increase debt issuance in short- and intermediate-dated maturities while delaying big increases at longer dates.

"Gold has been stuck in a range with an average price of $1,280 since early October but we are seeing some higher lows and higher highs, which indicates there is underlying support for the market," Hansen said.

Investors were keen to own gold to hedge against risks including a fall in global stock markets from current record highs, he said, predicting gold would rise to $1,325 by the end of the year.

Bets on higher gold prices by money managers increased last week for the first time since early September.

However, rising U.S. interest rates through next year were likely to strengthen the dollar and put pressure on gold, said Julius Baer analyst Carsten Menke. On the technical side, gold broke through resistance at the 50-day moving average around $1,286 and the next hurdle was at a Fibonacci level of $1,295.40, analysts at ScotiaMocatta said in a note.

Commerzbank analysts said gold was holding steadily above its 200-day moving average and they expected an attempt to break above $1,297.

Silver was up 1.19 percent at $17.142 an ounce. Platinum was 0.74 percent higher at $940 an ounce and palladium was up 0.54 percent at $1,003.90 after touching its highest since Nov. 10.