Gold scales new high as US dollar weakens ahead of Fed meeting

Lower interest rates reduces the opportunity cost of holding non-yielding bullion

Gold prices scaled a record peak on Tuesday (Sep 16), supported by a weaker US dollar ahead of the Federal Reserve’s policy meeting this week, where the central bank is widely expected to cut borrowing rates.

Spot gold rose 0.1 per cent to US$3,680.17 per ounce as at 9.09 am, after hitting a record high of US$3,689.27 earlier in the session.

US gold futures for December delivery were flat at US$3,718.80.

The US dollar traded near a 2½-month low against the euro and close to a 10-month trough versus the risk-sensitive Aussie. A weaker greenback makes gold less expensive for other currency holders.

US President Donald Trump, in a social media post on Monday, called for Fed chair Jerome Powell to enact a “bigger” cut to benchmark interest rates.

Traders are pricing in a near-certain 25-basis-point (bps) rate cut at the end of the two-day meeting on Sep 17, with a small chance of a 50 bps reduction, per the CME FedWatch tool.

BT in your inbox

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Lower interest rates reduces the opportunity cost of holding non-yielding bullion.

SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund (ETF), said that its holdings rose 0.21 per cent to 976.80 tonnes on Monday from 974.80 tonnes on Friday.

Meanwhile, on Monday, a US appeals court refused to allow US President Donald Trump to fire Fed governor Lisa Cook, the latest step in a legal battle that threatens the Fed’s longstanding independence.

SEE ALSO

Elsewhere, spot silver held steady at US$42.71 per ounce, platinum eased 0.1 per cent to US$1,399.40, and palladium gained 0.4 per cent to US$1,188.59. REUTERS