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Gold up as greenback slides

Xinhua, August 11, 2016 Adjust font size:

Gold futures on the COMEX division of the New York Mercantile Exchange rose on Wednesday as weaker U.S. dollar provided support to the broad dollar-peg precious metal.

The most active gold contract for December delivery rose 5.4 U.S. dollars, or 0.39 percent, to settle at 1,351.9 dollars per ounce.

Gold was also given support as investors believe that although the U.S. central bank has left the door open for a rate increase during 2016, the Q2 GDP numbers make it unlikely for a rate hike during the year.

Previous Fed minutes led traders to believe that the Fed may raise rates from 0.50 to 0.75 during the December FOMC meeting. According to the CME Group' s Fedwatch tool, the current implied probability of a hike from 0.50 to 0.75 is at 12 percent at the September 2016 meeting, 14 percent at the November 2016 meeting, and 38 percent at the December meeting.

Analysts believe Fed intends to soak up some of the banks' 2.5 trillion U.S. dollars of excess reserves as the U.S. economy begins to recover. Banks become more willing to take risks in a bullish economy, and as a result could potentially release some of their excessive reserves, flooding the economy with cash, causing inflation.

As the expectations for the rate hike decreased, the U.S. Dollar Index was also put under pressure as it fell by 0.5 to 95.65 as of 17:00 GMT. The index is a measure of the dollar against a basket of major currencies. Gold and the dollar typically move in opposite directions, which means if the dollar goes up, gold futures will fall as gold, measured by the dollar, becomes more expensive for investors.

Gold was given additional support as the U.S. Dow Jones Industrial Average fell by 30 points, or 0.16 percent as of 17:00 GMT. Analysts note that when equities post losses, the precious metal usually goes up, as investors are looking for a safe haven, while the opposite is true when U.S. equities post gains.

Silver for September delivery added 32 cents, or 1.61 percent, to close at 20.17 dollars per ounce. Platinum for October delivery rose 23.2 dollars, or 2.00 percent, to close at 1,183.10 dollars per ounce. Enditem