Gold climbed on Friday, recovering from Thursday’s drop, as the US dollar sank with investors weighing the impact of the US Federal Reserve’s new approach to setting monetary policy.
The metal rose the most in almost two weeks and the US dollar touched a two-year low a day after Fed Chairman Jerome Powell said that the central bank would seek inflation that averages 2 percent over time.
His comments sent bullion on a roller-coaster ride in the previous session, as he signaled the central bank would stay accommodative for longer, with a more tolerant approach on inflation, but would not hesitate to act if consumer prices rise considerably above its goals.
Photo: Bloomberg
Gold on Friday strengthened due to “a more measured appraisal of the shift in Fed nuances, along with a weakening dollar, for the same reason,” Rhona O’Connell, head of market analysis for EMEA and Asia regions at StoneX Group, said in an e-mailed note.
Higher inflation tolerance and low interest rates should see US real yields fall in the medium-to-longer term, which is supportive for gold, said Vivek Dhar, an analyst at the Commonwealth Bank of Australia.
Still, the fact that the Fed would also act if there are inflationary pressures adds doubt to how high US 10-year inflation expectations can reach, he said.
PRICES
Spot gold rose 1.98 percent to US$1,967.11 an ounce, up 1.45 percent for the week — its first weekly gain in three weeks.
The metal is down more than US$100 from a record set earlier this month as risk-on sentiment improved, but it is still one of the best-performing commodities this year after the COVID-19 crisis and massive stimulus measures boosted demand for havens.
Gold futures for December delivery rose 2.2 percent to settle at US$1,974.90.
The Bloomberg Dollar Spot Index dropped 0.9 percent to the lowest since May 2018, while US equities rose.
Economic confidence in the euro area continued to improve this month, data showed on Friday, but job cuts in the past few months across the continent mean consumers remain worried about the labor market.
In the US, the rebound in consumer spending slowed last month as virus cases rose in some states.
NO THREAT
The Fed’s shift to let inflation and employment run higher might signal that policy makers will keep interest rates low for years to come, lifting the appeal of non-interest-bearing gold. There is still room for bullion to set new all-time highs, although that could take time, said Ole Hansen, head of commodity strategy at Saxo Bank A/S.
Powell’s “speech did not threaten the bullish narrative for gold and silver,” Hansen said. “Low interest rates for longer, a weaker dollar, massive amounts of stimulus and the increased demand for inflation hedges are likely to continue to drive demand for both metals.”
The biggest risk to gold remains the discovery of a vaccine and a sharp correction in stocks, which would spark a drive to raise cash, he said.
Additional reporting by Reuters
REGIONAL COMPETITION: Over the past few years the Philippines has lost ground to neighbors such as Vietnam, Indonesia and Malaysia, a Philippine official said The Philippines is trying to enlist Taiwanese chip giants to expand in semiconductors, a bid to catch up with its neighbors who are emerging as significant suppliers in the industry. Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) and United Microelectronics Corp (UMC, 聯電) are among companies the Philippines is reaching out to as it seeks equipment and expertise to build out chip fabrication operations, said Dan Lachica, head of the Southeast Asian country’s main electronics industry group, the Semiconductor and Electronics Industries in the Philippines Foundation Inc (SEIPI). The association is working with Philippine officials in Taiwan to talk with potential
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) halted shipments to a customer this month after its semiconductors were sent to China’s Huawei Technologies Co (華為), potentially breaching US sanctions, a government official said. The US slapped sanctions on Huawei in 2019, and expanded them the following year, over fears its technology could be used for Beijing’s espionage operations. The restrictions prevent TSMC from selling semiconductors to Huawei. However, TSMC discovered on Oct. 11 that chips made for a “specific customer” had ended up with the Chinese company, a Taiwanese official with knowledge of the incident said on the condition of anonymity. TSMC “immediately activated
Nvidia Corp is set to unveil investment plans for Thailand, joining Alphabet Inc and Microsoft Corp, as Southeast Asia becomes a hot spot for building artificial intelligence (AI) data centers and manufacturing the components that power them. The US chip designing firm would announce investments during chief executive officer Jensen Huang’s (黃仁勳) trip to Bangkok in December, Thai Minister of Commerce Pichai Naripthaphan said on Monday. He declined to give details on the investment or how much the company would bring into Thailand. The investment by Nvidia could lead to more funding “with related clusters following suit,” Pichai said. Clinching
Powerchip Semiconductor Manufacturing Corp (力積電) yesterday said it had terminated a deal with SBI Holdings Inc to help build a chip manufacturing plant in Japan, as Powerchip found it unpractical to take the full responsibility of operating a plant it does not own for more than 10 years. Powerchip, Taiwan’s third-largest contract chipmaker, inked a non-binding memorandum of understanding (MOU) with SBI in July last year to explore the possibility of building a 12-inch chip fab in Japan. According to the MOU, Powerchip’s role was that of a technology provider, as the company hopes to generate a new revenue stream,