Gold prices hold above $1,300 on US rate pause hopes 

Gold slipped on Monday as a deal to reopen the US government dented safe-haven demand, but prices hovered above the key $1,300-level on hopes the US Federal Reserve will keep interest rates unchanged this week.

FUNDAMENTALS

Spot gold had fallen 0.1 per cent to $1,301.37 per ounce by 0114 GMT, while US gold futures climbed 0.2 per cent to $1,300.61 per ounce Asian stocks advanced on Monday as Wall Street rallied after a deal was announced to reopen the US government following a prolonged shutdown that had shaken investor sentiment.

The shutdown had added to the worries of investors who were already concerned over slowing global growth, signs of stress in corporate earnings and a still unresolved Sino-US trade war.Focus is shifting to the Fed’s policy meeting this week, when the US central bank is expected to leave interest rates unchanged. The Federal Open Market Committee meeting is scheduled for Jan. 29-30. The Fed raised interest rates four times last year and has signalled it will probably lift borrowing costs twice in 2019, though some central bank officials have said they will be patient in raising rates.

Spot gold rose 1.8 per cent on Friday, its best one-day percentage gain since Oct. 11, to its highest since June 14, 2018. The metal also broke above the psychological level of $1,300 level after failing multiple times due to strong technical resistance. Gold tends to appreciate on expectations of lower interest rates, which reduce the opportunity cost of holding non-yielding bullion.

China will take steps to spur growth amid a trade war with the United States, but there is limited room for aggressive stimulus in an economy already laden with massive debts and a property market prone to credit-driven spikes, policy insiders said. Demand for physical gold in India improved slightly last week as local prices eased from their highest level in over five years, while buying gathered steam in China ahead of the Lunar New Year festival. Holdings of SPDR Gold, the largest gold-based exchange traded fund, hovered around their highest levels since late June 2018.

Courtesy: Reuters

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