Gold price steady as US dollar retains weaker tone

on Nov 23, 2017
Updated: Oct 11, 2019

The gold price was steady in early afternoon trading Thursday, reversing earlier minor losses.

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Traders are likely holding their ground after a little profit taking earlier, as the price of the precious metal rose late Wednesday in the wake of the minutes from the latest US Federal Reserve meeting.

The gold price was little changed around 1400 BST, at close to $1.292 per ounce.

The gold price is intrinsically linked to the US dollar as it’s priced in the currency. When the US dollar weakens, the price of gold typically rises and vice versa.

Fed minutes weigh on US dollar

The publication of the minutes, late Wednesday, from the latest US Fed policy meeting, weighed heavily on the US dollar. It lost ground against most currencies including the Japanese Yen, British pound and euro.

One main reason behind the weakness, was because although the Fed will likely go ahead with an expected rate hike at its December meeting, the future pace of interest rate rises is becoming more uncertain.

Some Fed members are concerned the level of inflation will remain sluggish, despite improving economic growth and the better employment backdrop.

If rates move higher but inflation stays low, even as the jobs market improves, it suggests there are other imbalances in the economy that still need addressing.

Despite the uncertainty over weak inflation in the minutes, Yellen is currently holding to her line of anticipating an inflation rebound ‘soon’.

The Fed’s target for inflation is 2%.

Gold price could rise further

US dollar moves aside, some analysts are anticipating further gains for the gold price.

A recent research note from Citi, suggests the current heightened state of geopolitical risk will serve to support the price of gold, as it will work to strengthen the safe haven status of the yellow metal.

"Event-driven bids for gold seem to be occurring more frequently and may be the new normal,” Citi said. It added the precious metal could push past the $1,400 per ounce price, on occasion, in the years leading up to 2020. 


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