Gold rises over softer dollar as investors await Fed meeting

By Onome Amuge

Gold futures soared to four consecutive sessions to end the week moderately higher, supported by a weakened dollar.

Spot gold gained 0.2 per cent at $1,793.16 ounce, while US gold futures was up 0.2 per cent to $1,804.80 per ounce.

Meanwhile, the dollar index slumped 0.1 per cent. A weaker dollar makes gold attractive to buyers holding other currencies.

Commenting on gold’s upward movement, Clifford Bennett, chief economist at ACY Securities, raised optimism there is a real chance of upward accretion in gold heading into the following week’s Fed policy meeting and CPI data.

“If the Fed slows the pace as per expectation, along with a moderate CPI print, then the dollar might weaken and all of a sudden you could see a perfect storm rushing into gold’s horizon,” he added.

Edward Monya, senior analyst at OANDA, said gold might struggle for meaningful moves until  the last key piece of inflation data is obtained before the Fed meets.

In a note made available to Business A.M., Monya said the producer price report will have many expecting the CPI report to remain stubbornly hot, which could tilt the scales for the Fed to do more tightening beyond February.

“If CPI runs hot, you might see a strong case for the Fed to deliver back-to-back half point rate increases before they pause, which might suggest gold might give back some of the gains it made over the past month,” Monya noted.

For many gold investors, 2022 has been a disappointing year. Despite an extraordinary rise in inflation, gold has seen lacklustre investment demand. Market reports showed that the precious metal’s utility as an inflation hedge couldn’t overcome the headwinds of a strong U.S. dollar as the Federal Reserve was forced to raise interest rates at the fastest pace in more than 40 years.

Despite gold’s price action, Juan Carlos Artigas, global head of research at the World Gold Council, said that the precious metal has done its job as a portfolio diversifier.

“Investors who had gold in their portfolio in 2022 would have seen better returns, fewer losses and less volatility. We expect that will continue to be the case in 2023,” he added.

In a recent forecast, the WGC said it expects to see a relatively stable gold price in 2023 in the face of significant economic uncertainty.

For other precious metals, spot silver rose 0.6 per cent to $23.20 per ounce, platinum was up 0.4 per cent to $1,006.91 per ounce, and palladium was down 0.4 per cent to $1,918.50 per ounce.