Gold hits 2-wk high as Fed rate outlook weighs on dollar

Mon Mar 20, 2017 9:04am GMT

By Sethuraman N R

(Reuters) - Gold prices hit a two-week high on Monday as the dollar slumped to near 6-week lows after the U.S. Federal Reserve's dovish outlook on the pace of rate increases this year continued to disappoint dollar bulls.

Spot gold rose 0.5 percent to $1,234.60 per ounce by 0735 GMT, after earlier touching $1,235.50 an ounce, its highest since March 6.

U.S. gold futures gained 0.3 percent to $1,234.10.

The dollar index, which measures the greenback against a basket of currencies, was down 0.3 percent at 100.040, after hitting a low of 100.020, its worst since Feb. 7.

Gold prices have rebounded more than $35 from its low hit before the policy decision to boost rates last Wednesday, while the dollar has fallen 1.7 percent from its high of 101.71 hit the same day.

Fed Chair Janet Yellen's cautious guidance last week has investors pricing in almost no chance of another rate rise at the next policy meeting in May, and is seen rising to around 50-50 for June. [FEDWATCH]

"The market was geared for a hawkish FOMC and the Fed was really dovish. There was a lot of short-covering. People are now putting gold back on the plate and are more comfortable," a Hong Kong-based precious metals trader said.

"The dollar is weaker across the board ... It's pushing gold higher ... a pure technical buying."   Continued...

Gold bars are stacked at a safe deposit room of the ProAurum gold house in Munich March 6, 2014. REUTERS/Michael Dalder
  • Africa
  • US
  • Europe
  • Asia
UK £ USD =1.2955
Euro USD =1.1397
Rand USD =0.0774