Gold extends gains to third day as rate hike fears ease

SINGAPORE Thu Apr 10, 2014 9:37am IST

Mahamet, a 17-year-old Syrian boy from Azaz, waits for customers in front of the jewellery shop where he works as a translator in Kilis on the Turkish-Syrian border March 18, 2014. REUTERS/Murad Sezer

Mahamet, a 17-year-old Syrian boy from Azaz, waits for customers in front of the jewellery shop where he works as a translator in Kilis on the Turkish-Syrian border March 18, 2014.

Credit: Reuters/Murad Sezer

Related Topics

SINGAPORE (Reuters) - Gold extended gains to a third session on Thursday, scaling fresh two-week highs, after minutes from the Federal Reserve's policy meeting showed that officials were not keen on increasing interest rates anytime soon.

Gold prices came under pressure last month after Fed Chair Janet Yellen said the U.S. central bank would probably end its massive bond-buying programme this fall and could start raising interest rates around six months later.

Low interest rates, which cut the opportunity cost of holding non-yielding bullion above other assets, had been an important factor driving gold higher in recent years.

Minutes from the Fed's March 18-19 meeting released on Wednesday showed policymakers were unanimous in wanting to ditch the thresholds they had used to telegraph a policy tightening and did not reveal any discussion of keeping rates near zero for a considerable time.

"The main takeaway from the meeting minutes is: nothing has changed, any perception of added hawkishness is miscommunication," said Phillip Futures analyst Joyce Liu.

"Although there is more room for upside, the climb (in gold prices) is expected to be ... a choppy one. In the mid-term, prices are more likely to succumb to underlying bearishness," said Liu.

Spot gold rose to $1,316.81 an ounce - its highest since March 25 - before settling to trade up 0.3 percent at $1,315.04 by 0319 GMT.

It had gained 1.2 percent in the previous two sessions, also helped by rising geopolitical tensions in Ukraine that boosted its safe-haven appeal.

Gold got off to a good start to 2014 after a 28 percent drop in 2013, but posted its first monthly decline of the year in March on fears that the Fed would soon hike rates.

SPDR Gold Trust, the biggest gold-backed exchange-traded fund, saw fresh money coming in earlier in the year but it hasn't recorded any inflow since March 24.

Lack of fund inflows, combined with subdued physical demand, would undermine any price gains, traders warned.

As a sign of weak physical demand, gold stocks sitting in U.S. exchange warehouses have risen to a 10-month high.

Prices in top buyer China slipped back to a discount of about $2 an ounce on London prices on Thursday from a premium in the previous session.

(Reporting by A. Ananthalakshmi; Editing by Ed Davies and Joseph Radford)

FILED UNDER:

Reforms Push

REUTERS SHOWCASE

Reuters Exclusive

Reuters Exclusive

India looks to sway Americans with nuclear power insurance plan  Full Article 

To Boost Growth

To Boost Growth

Crank up public spending to revive growth - chief economic adviser.   Full Article 

Bold Steps

Bold Steps

SpiceJet rescue plan marks bold bet on Indian aviation recovery.   Full Article 

New Airline

New Airline

Tata, Singapore Air venture Vistara to take off on Jan 9.  Full Article 

Online Sales

Online Sales

Knock knock. Who's there? Amazon's best-selling holiday author.  Full Article 

26/11 Plotter

26/11 Plotter

Pakistan to challenge bail for Mumbai attack "mastermind".  Full Article 

Chinese Economy

Chinese Economy

China revises up size of 2013 economy, sees no effect on 2014 growth.  Full Article 

Reuters Poll

Reuters Poll

BSE Sensex to hit 32,980 by December 2015  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage