Dollar Weakens as Gold Rises
Gold prices climbed on Monday, boosted by a weaker dollar and expectations of measured monetary-policy tightening from the Federal Reserve.
Gold for February delivery, the most actively traded contract, closed up 1.5% at $1,080.60 a troy ounce on the Comex division of the New York Mercantile Exchange.
Prices for the precious metal closed at fresh six-year lows on Dec 17, a day after the Federal Reserve raised interest rates for the first time in nearly a decade. Gold, which pays its holders nothing, struggles to compete with yield-bearing investments when interest rates rise.
The Fed’s move also spurred a rally in the dollar, putting more pressure on the precious metal, as gold is denominated in the U.S. currency and becomes more expensive for foreign investors when the dollar rises.
The U.S. currency gave back some of those gains on Monday, as The Wall Street Journal Dollar Index slipped 0.2% to 90.10. At the same time, the Fed has promised to take a go-slow approach to raising interest rates, as it tries to avoid stifling a hard-won economic recovery.
“The Fed was hanging over the gold market, and now that we’re through it there is some relief buying,” said Bob Haberkorn, a broker at RJO Futures. “The downside for gold appears to be limited, at least until the end of the year.”