Gold rises above 66-month low as dollar sags
Bullion lost more than 3% last week after a rout on Monday accompanied by big volume in New York and Shanghai that sparked more sell-offs and pulled the price as low as $1,077 on Friday, its cheapest since February 2010.business Updated: Jul 27, 2015 16:05 IST
Gold climbed above $1,100 an ounce on Monday as a weaker dollar helped it distance from its lowest level since 2010, although investors are not convinced that a meaningful recovery is at hand amid a looming hike in US interest rates.
The Federal Reserve will hold a two-day meeting that ends on Wednesday at which policymakers are likely to send more signals pointing to a rate rise later in the year as the US economy strengthens.
Spot gold was up 0.4% at $1,102.95 an ounce by 0642 GMT after falling for a fifth straight week last week, the longest run since late 2012.
The dollar sagged against a basket of currencies after a drop in US stocks and bond yields, making dollar-denominated bullion cheaper for holders of other currencies.
Bullion lost more than 3% last week after a rout on Monday accompanied by big volume in New York and Shanghai that sparked more sell-offs and pulled the price as low as $1,077 on Friday, its cheapest since February 2010.
US gold for August delivery gained 1.6% to $1,102.30 an ounce.
Gold's recovery from last week's low appears to be mostly due to short-covering, said HSBC analyst James Steel. "So while we think prices may firm near-term, the selloff does not look as if it's entirely over as we do not yet detect a notable change in investor sentiment."
US speculators turned bearish on Comex gold for the first time since at least 2006 in the week ended July 21, US government data showed on Friday.
As gold prices tumbled, holdings of the world's biggest gold-backed exchange-traded fund, the SPDR Gold Trust, fell for a seventh day on Friday to 21.87 million ounces, the lowest since September 2008.
Many analysts expect the Fed to raise interest rates, the first increase in nearly a decade, by September.
Based on forecasts mistakenly released on Friday, staff economists at the Federal Reserve expect a quarter-point rate increase this year. The Fed later said it was not the correct document and gave a new table showing a slightly lower forecast for gross domestic product and inflation in 2015.
At this week's meeting, the Fed is unlikely to deviate from its recent policy statement or Fed Chair Janet Yellen's congressional testimony this month, Mizuho Bank said.
"The most likely outcome is that Fed rhetoric will emphasise that the U.S. economy is on track for a rate hike(s) this year," the bank said in a note.
Spot palladium rose 0.7% to $627 an ounce and platinum gained 0.3 percent to $985, not too far from last week's multi-year lows.