Forexpros – Gold prices rose on Thursday as a few investors bought the metal on sentiment the Federal Reserve will stimulate the economy with monetary easing tools, which weaken gold’s traditional hedge, the dollar.
Growing talk that the economy may improving enough to prompt the Fed to reconsider stimulus capped the precious metal’s gains.
On the Comex division of the New York Mercantile Exchange, gold futures for October delivery were up 0.12% and trading at USD1,606.45 a troy ounce, up from a session low of USD1,604.05 and down from a high of USD1,607.05 a troy ounce early during the session.
Gold futures were likely to test support at USD1,600.25 a troy ounce, the low from July 26, and resistance at USD1,607.85, the high from Aug. 5.
Despite improving economic indicators in the U.S., many investors traded on Thursday under the assumption the Federal Reserve will stimulate the economy with a third round of quantitative easing, under which the U.S. central bank buys assets from banks, pumping the economy with liquidity to push down borrowing costs.
Side effects to such a policy include rising gold prices and a weaker dollar.
Hopes for monetary stimulus have pushed up gold prices amid anticipatory buying, though an improving economy and higher stock prices — the product of speculation that the Fed will act — may prompt the monetary authority to hold off, some economists have said, which tempered gold’s gains.
Government data revealed that the U.S. consumer price index came in unchanged in July for the second consecutive month, compared to expectations for a 0.2% monthly rise, while core consumer prices, which exclude food and energy prices, rose 0.1%, less than the expected 0.2% increase.
The price data brought in more bulls than bears, allowing for gold to rise.
Elsewhere on the Comex, silver for September delivery was up 0.12% and trading at USD27.845 a troy ounce, while copper for September delivery was up 0.30% and trading at USD3.360 a pound.
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