Argor Heraeus SA brand one kilogram gold bars are arranged for a photo at the Chinese Gold and Silver Exchange Society in Hong Kong, China.
Brent Lewin | Bloomberg | Getty Biller
Gold rose on Thursday after the US Federal Reserve’s first increase in borrowing costs in three years came as no surprise, with gains underlined by a decline in the dollar and US Treasury Yields.
Spot Gold advanced 0.6% to $ 1,939.78 per ounce from 1219 GMT. US gold futures rose 1.75% to $ 1,942.40.
The US Federal Reserve on Wednesday raised interest rates by 25 basis points, but because the rise was on expected lines and came against the backdrop of rising prices, it did not consider Gold’s appeal as an inflation hedge.
“It sells the rumor, buys the fact,” as Gold moves forward with the bad news, said independent analyst Ross Norman.
“While counter-intuitive as the rate hike should be negative for gold, it authenticates the claim that we have an inflation problem.”
Rising US interest rates tend to increase opportunity costs to not keep up, keeping Greenback price bullion.
Although the Fed has put forward an aggressive plan to cut next year’s lending costs, the dollar has eased and payouts on 10-year US Treasury notes, with investors apparently pushing for an even stronger interest rate hike, which is what gold increased.
The Fed’s “meek” response to rising inflation has helped gold, said Brian Lan, managing director of trader GoldSilver Central. “People will see that it’s still good to keep gold because .25% don’t even rock the boat.”
Analysts also said that investors in Safe-Haven Gold will continue to pursue political and economic risks posed by the Russian invasion of Ukraine, which entered its fourth week.
Meanwhile, “if you have to look at a single thing to encourage you to have that die-cut leg, then you would be looking at ETF (exchange-traded funds) flow and that’s really positive,” Ross Norman said.
Holdings of the world’s largest gold-backed ETF, SPDR Gold Trust, rose 0.8% on Wednesday to its highest level since March 2021 at 1,070.53 tonnes.
Spot silver rose 0.6% to $ 25.21 per ounce, while platinum fell 0.2% to $ 1,015.91. Palladium added 1.8% to $ 2,452.83.
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