Arab Today, arab today gold shines on us rate decision
Last Updated : GMT 21:25:08
Arab Today, arab today
Arab Today, arab today

Gold shines on US rate decision

Arab Today, arab today

Arab Today, arab today Gold shines on US rate decision

The Federal Reserve
London - AFP

The US Federal Reserve's decision to leave its main interest rate at close to zero percent has hit the dollar, boosting the price of gold.

Gold on Friday hit a two-week high at $1,141.97 an ounce on the London Bullion Market.

"Gold was definitely saved by the Fed as no raise in interest rates maintained its appeal of alternative asset," said Jonathan Sudaria, dealer at London Capital Group.

The precious metal is generally seen as a haven investment in times of economic uncertainty, although gold has come under heavy pressure in recent months as the dollar strengthened on expectations of a US rate hike.

The Federal Reserve held its key interest rate locked near zero Thursday, citing worries about how the slowdown in China will hit the US economy.

Fed chief Janet Yellen said in a news conference that central bank policymakers cited the ongoing crisis in commodities-hungry China and recent turmoil on world markets as playing a role in the decision.

"Markets were volatile following the decision, but overall outcomes were supportive for bonds and gold, but negative for the dollar, as markets scaled back rate hike expectations," said ABN Amro analyst Georgette Boele.

Gold futures stood at $1,141.50 an ounce at Friday's fixing, compared with $1,101.25 an ounce a week earlier. Gold's gain helped to also pull higher sister metal silver.

"Commodity markets initially welcomed the US central bank’s decision to keep rates on hold yesterday, but the moves have been small," noted Julian Jessop, head of commodities research at Capital Economics research group.

"This makes sense, as rates are still likely to rise soon, and the delay could simply prolong the uncertainty. Worse still, the Fed’s hesitancy may yet reinforce investors’ worries about the health of the global economy, rather than reassure them, leaving gold as one of the few lasting beneficiaries," he added.

Weaker commodities demand from China, the world's second biggest economy after the United States, is weighing hard on financial markets generally.

China at the start of the week released another set of figures that underline weakness in its huge economy -- the main driver of global growth.

The government said growth in industrial production increased below expectations in August while retail sales accelerated a little more than forecast.

"With global financial markets remaining sensitive to fresh news from China, the latest set of Chinese data proved fairly disappointing and cemented concerns about the economy," Rabobank said in a note to clients.

Industrial production, which measures output at factories, workshops and mines, rose 6.1 percent year-on-year, the National Bureau of Statistics announced, describing the sector as still weak.

The data pressured prices of industrial, or base, metals, with copper. aluminium and lead all down Friday compared with one week earlier.

"The biggest factor weighing on prices was clearly the weak Chinese data," said analysts at Commerzbank.

 

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