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Gold edged higher on Monday, buoyed by expectations that the US Federal Reserve may have fewer chances to raise interest rates this year in the face of a wobbly global economy.
That bodes well for non-interest bearing gold, which fell more than 10 per cent last year, after the Fed lifted rates for the first time in nearly a decade in December.
FOMC policy meet
The Federal Open Market Committee meets this week and is widely expected to leave its federal funds rate unchanged at 0.25-0.5 per cent when policymakers conclude their meeting on Wednesday.
Falling inflation assumptions, coupled with turbulence in global markets could lead them to signal deepening concern over the outlook for the US and world economy.
Spot gold was up 0.2 per cent at $1,100.56 an ounce by 0638 GMT, after gaining nearly 1 per cent last week.
“Given the turbulence in financial markets, the Fed might not be able to hike interest rates too many times in 2016,’’ said Mark To, head of research at Hong Kong's Wing Fung Financial Group.
“If gold can stay above $1,100 in the coming days, it may signal a further rebound, maybe even to $1,200 in the coming months.’’
Fed rate hike
Expectations for a March rate increase are already starting to fade, and economists polled by Reuters now forecast three hikes in 2016 rather than the four initially floated by the Fed.
Mizuho Bank expects US fourth-quarter gross domestic product to be revised lower which it said “can be a soothing balm if accompanied by renewed Fed dovishness’’.
US GDP data
The US government will release its first reading on fourth-quarter economic growth on Friday. Economists polled by Reuters suggest US GDP growth of 0.80 per cent in October-December and annual expansion of 2.5 per cent in 2016.
Gold’s gains, also spurred by a softer dollar, came despite higher equities as Asian stocks tracked Wall Street’s rally on Friday.
The precious metal had benefited from investor aversion towards risky assets that has hit global stocks and crude oil. It peaked at $1,109.20 last week, its loftiest since January 8.
US gold for February delivery gained 0.5 per cent to $1,101.30 an ounce.
COMEX gold
Hedge funds and money managers increased their bullish bets in COMEX gold in the week to January 19, and also boosted their bullish bets in silver to the highest in more than two months, U.S. Commodity Futures Trading Commission data showed on Friday.
Spot silver rose 0.6 per cent to $14.09 an ounce and palladium jumped 1.2 per cent to $500. Platinum climbed 0.6 per cent to $834.39 per ounce, regaining some lost ground after skidding to a seven-year low of $806.31 last week.
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