Gold Prices Soaring After Fed Minutes
Gold prices spiked on Thursday as investors speculated the Federal Reserve would be dovish on hiking interest-rates given global economic headwinds.
The gold price for June delivery rose as much as 1.8% to $1,245 a troy ounce before trimming gains to $1,242.40 a troy ounce, up 1.4%, at 11:28 a.m. on Comex in New York.
The gold price, despite the loss of 1.7% over the past month, is still 17% higher than its settlement on the last day of 2015.
Minutes from the Fed’s March 15-16 meeting released on Wednesday indicated that policymakers had debated whether an interest rate hike would be required as early as April, before agreeing that that risks from a global economic slowdown should warrant a cautious approach.
At the close of last month’s meeting, policymakers hinted they projected to hike rates twice in 2016, down from the four 0.25% hikes they had projected back in December.
Gold is sensitive to interest-rate hikes as they increase the opportunity cost of holding the zero-yielding precious metal.
Dollar Weakens Further Against Yen
Higher rates can also strengthen the U.S. dollar, which becomes more attractive to investors seeking returns. Bullion is denominated in dollars and a solid greenback makes the yellow metal more expensive for holders of other currencies.
The U.S. dollar index was down 0.1% to 94.36 on Thursday. The dollar extended its weakness against the Japanese yen, considered as a safe haven, falling 1.8% to 107.8 yen. The U.S. currency is currently 14% lower than its 52-week high of 125.9 yen reached last June.
The gold price benefited on Thursday a general risk-averse sentiment originating from worries about global economic growth. The three major U.S. indexes fell sharply, with the Dow Jones Industrial Average (DJIA) giving up one percent to 17,539.
In gold stocks, U.S.-listed shares of Toronto, Canada-based Barrick Gold Corporation (NYSE:ABX) rose 3.9% to $14.52. The stock has nearly doubled so far this year. Goldcorp Inc. (NYSE:GG) advanced 2.2% to $16.43, expanding this year’s rally to 42%.
Elsewhere on Comex, the silver price for May delivery rose 1.4% to $15.27 a troy ounce, stretching its year-to-date gain to 10.7%.
Platinum was up 1.4% to $957.8 a troy ounce, while palladium was down 0.3% to $536.35.