Gold prices revived on Thursday from their lowest in more than five years in the previous session as the dollar fell back, releasing its stranglehold on commodities and making gold more affordable for buyers paying with other currencies.
Federal Reserve officials on Wednesday continued to flag December as a likely time for interest rates to rise after seven years near zero, with two expressing confidence they will be able to pull off a rate hike smoothly despite fears of an abrupt market reaction.
“I’m convinced that the start of the (rate hike) cycle will see relative dollar weakness as investor money flows into other regions and other types of investment, away from the US where the cost of capital - and doing business will also grow,” said chief investment officer Jonathan Barratt of Ayers Alliance in Sydney.
He added that a rate increase could also boost gold’s appeal as a hedge against inflation.
The dollar pulled back in Asian trading on Thursday as investors took profits following its rise to seven-month highs, as the Fed officials’ comments as well as minutes from the central bank’s latest meeting hinted that an interest rate hike could be right around the corner.
Spot gold was up 0.7% at $1,077.91 an ounce by 0628 GMT. Prices fell to 1,064.95 an ounce on Wednesday, the weakest since early 2010.
US gold had risen 0.8% to $1,077 an ounce.
US housing starts in October dropped to a seven-month low, weighed down by a steep decline in the construction of multi-family homes, but a surge in building permits suggested the housing market remained on solid ground.
Meanwhile, South Africa’s Gold Fields Ltd is considering putting its Damang mine in Ghana “under care and maintenance” until gold prices recover, the bullion producer said on Thursday.