* Physical holdings in gold ETFs fall since Fed rate rise
* Gold resistance at $1,260/oz, 55-day moving average
* Hold off on further rate hikes until inflation moves
-Fed’s Bullard
NEW YORK/LONDON, June 23 Gold prices climbed to
one-week highs on Friday, boosted by a weaker dollar, economic
and political uncertainty around the world, as well as the
limited prospect of further interest rate rises in the United
States.
The Federal Reserve should wait on any further rate
increases until it is clear inflation is reliably heading to the
Fed’s 2 percent target, St. Louis Fed President James Bullard
said on Friday, highlighting the central bank’s struggle over
how to weigh a recent slip in the rate of price
increases.
However, Bullard does not currently vote on the Fed’s
policy-setting committee.
Spot gold was up 0.44 percent at $1,255.7 an ounce by
2:04 p.m. EDT (1804 GMT) after earlier touching a session high
at $1,258.81. U.S. gold futures rose 0.6 percent to
settle at $1,256.4. Prices were on track for their first weekly
percentage gain in three weeks.
“Gold finally made an effective stand this week after a
fortnight of declines and may have established a short term
bottom at $1,240,” said Tai Wong, director of base and precious
metals trading for BMO Capital Markets in New York.
“Looking ahead, market will parse Chair (Janet) Yellen next
week to see if she makes any notable changes to the Fed’s stance
since the June meeting.”
Allegations of ties to Russia have cast a shadow over U.S.
President Donald Trump’s first five months in office, North
Korea testing a rocket engine and Brexit negotiations are all
fuelling concern about global stability.
“Political noise out of Washington regarding Trump’s ties
with Russia is unlikely to provide lasting support to gold while
an escalation of the geopolitical tensions with North Korea is a
bullish wild card,” Julius Baer analysts said in a note.
The dollar fell against a basket of major currencies on
Friday , on track for its biggest single-day drop in three
weeks, on persistent doubts whether the Fed would raise interest
rates again this year due to softening inflation data.
Further pressuring the dollar was Markit’s flash June
reports on U.S. factory and services activity, which was weaker
than expected, while the government said new home sales
rebounded more than expected in May.
Gold is often used by investors as a hedge against political
and financial uncertainty. But it doesn’t earn interest,
dividends or coupons and it costs money to insure and store.
A rising U.S. currency makes dollar-denominated metals more
expensive for holders of other currencies, which potentially
could subdue demand.
The Fed’s rate rise on June 14 saw investors sell gold.
Holdings of the largest gold-backed exchange-traded-fund (ETF),
New York’s SPDR Gold Trust , have fallen to 27.456 million
ounces from 27.875 million ounces on June 13.
On the technical side, the first upside barrier comes in
around $1,260 near the 55-day moving average. That is followed
by the 21-day moving average at around $1,264, while the 100-day
moving average at $1,249 provides strong support.
Elsewhere, silver gained 1.1 percent to $16.71 an
ounce, platinum rose 0.9 percent to $929.25 and palladium
fell 2.8 percent to $858.08 an ounce. — Neal Bhai Reports
