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PRECIOUS-Gold near 1-year high, buoyed by Korea tensions, lower dollar

By Pratima Desai

    LONDON, Sept 6 (Reuters) - Gold held near one-year highs on

Wednesday, boosted by tensions on the Korean peninsula and a

lower dollar due to growing expectations the Federal Reserve

will delay rate rises.

    Spot gold        was unchanged at $1,338.30 an ounce at 1054

GMT, a gain of around 8 percent so far this quarter and more

than 16 percent so far this year. It touched $1,344.21 an ounce

on Tuesday, its highest since Sept. 8.

    U.S. gold futures         were down 0.1 percent at $1,343.40

an ounce.

    "Rising geopolitical tensions, the hurricane hitting the

U.S. and the looming debt ceiling are increasing demand for safe

assets," said Danske Bank analyst Jens Pederson.

    "These extraordinary factors are also weakening the dollar

from the point of view that the Fed may further postpone

normalisation of monetary policy, which would be good news as it

would keep a lid on U.S. yields."

    Both U.S. government bonds and gold are seen as risk-free by

investors. Low U.S. Treasury bond yields mean there is little

opportunity cost in holding gold, which earns nothing and costs

money to insure and store.

    Analysts say low U.S. yields mean investors are unlikely to

buy Treasuries, which would also weigh on the dollar.      

    A lower U.S. currency makes dollar-denominated gold cheaper

for holders of other currencies, which could boost demand.

     A potential standoff over the U.S. federal debt ceiling has

raised alarm bells among investors who fear a repeat of 2011

when a prolonged showdown over increasing the borrowing limit

and subsequent downgrade of U.S. credit quality led to slump in

the S&P 500 stock index.            

    Investor unease was reinforced after a North Korean diplomat

warned his country is ready to send "more gift packages" to the

United States as world powers struggled for a response to

Pyongyang's latest nuclear weapons test.            

    "The concern now is that another launch could take place on

September 9th, which is the (North Korea's) Independence Day,"

said INTL FCStone analyst Edward Meir.

    "Gold is likely to move higher over the course of September,

sustained by a weaker dollar and North Korean tensions...Any

further wobbles in US equities could provide further support and

perhaps nudge it towards our $1390 price target."

    Technical resistance is at $1,352, near the high from last

September, followed by $1,376, the upper Bollinger band on the

monthly charts. But the momentum indicator near zero suggests

gold may be in for a period of consolidation.            

    Elsewhere silver        gained 0.3 percent to $17.95,

platinum        rose 0.3 percent to $1,009.00 and palladium

       added 0.4 percent to $962.05 an ounce.

 

 (Additional reporting by Apeksha Nair in Bengaluru; Editing by

Elaine Hardcastle)

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