LONDON. — Gold held close to its lowest in two months yesterday, as the dollar marched higher after central bank heads signalled that interest rates were set on a diverging course in the US, Europe and Japan.
At a gathering of central bankers in Jackson Hole, Wyoming, Federal Reserve chairwoman Janet Yellen nodded to the concerns of some Fed officials about the sustained level of monetary policy stimulus, even as she stressed the need to move cautiously on raising rates.
The heads of the European Central Bank (ECB) and Bank of Japan pledged more policy stimulus, which weighed on the euro and the yen versus the US currency.
Gold was down 0,2 percent to $1 276,94 in the morning. The metal fell 1,8 percent last week, its biggest weekly fall in a month, hurt by strong US economic data and speculation of an early interest-rate hike, which sent the metal to its lowest in two months at $1 273,06 last Thursday.
US gold futures lost $2,40 to $1 277,70 an ounce. Electronic trading was halted for four hours yesterday due to a technical glitch.
The dollar was up 0,3 percent against a basket of major currencies, aided by steadier yields on Treasury notes, making gold more expensive for other currency holders.
The metal, however, held above chart support at about $1 270, traders said, as liquidity was drained by the absence of UK players on a Bank Holiday weekend.
“Gold is holding well above support at $1 271 considering the perfect storm of negative gold news last week when we had rising stocks, rising bond yields, strong economic data from the US and a firmer dollar,” Saxo bank senior manager Ole Hansen said.
“Even though the Fed interest rates tightening is receiving most of the attention, there is a lack of commitment because of poor liquidity at the moment.”
The Fed has said it would wait a “considerable time” after winding down a stimulative bond-buying programme in October before raising rates. Financial markets currently expect a rate hike around the middle of next year.
Higher interest rates would hurt the attractiveness of non-interest-bearing assets such as gold.
Investment demand for gold was also hampered by stronger European equities after ECB president Mario Draghi raised expectations of further policy easing. — Reuters.