Gold futures held in positive territory Wednesday, after two straight sessions of gains as a softening US dollar attracted holders of international currencies into the market.
On Tuesday, gold closed at a two-week high, with the gains attributed to the softness in the US dollar following its recent strength. The decreasing US dollar may be encouraging more purchases of the commodity by international investors, but the expectation remains that the Fed will move to increase interest rates by year-end. According to Fed-fund futures tracked by CME, investors now put the odds of an interest-rate increase in December at just over 65%.
Recent comments by Federal Reserve officials also support a December rate hike. On Monday, Fed Vice Chair Stanley Fischer said the US central bank is “very close” to its employment and inflation targets and Boston Fed President Eric Rosengren added that the current level of employment and inflation make a good case for hiking rates soon. The September Fed meeting minutes showed that many Fed officials wanted a rate hike in September, but Fed Chair Janet Yellen argued against it. While the Fed is also meeting in November, no rate hike decision is expected due to the meeting’s proximity to the Presidential Election.
Gold also held onto its gains Wednesday after the release of some mixed economic data. According to the Commerce Department, housing starts fell to a one-and-a-half year low in September, but construction of single-family homes jumped. Another bullish factor for gold, the World Gold Council on Wednesday said it believes the recent drop in gold prices has stoked physical gold demand in China.
Wednesday afternoon, gold futures were up 0.6% at $1,270.40 per ounce.