Gold scales 5-month peak as dollar dips on China reopening hopes

BENGALURU - Gold prices hit a five-month high on Monday, as the US dollar edged lower after more

Chinese cities relaxed Covid-19 restrictions over the weekend.

Spot gold rose 0.6 per cent to US$1,809.04 per ounce by 0452 GMT, after touching its highest level since July 5 at US$1,809.91 earlier. US gold futures gained 0.7 per cent to US$1,821.70.

The dollar index was down 0.4 per cent at a more than five-month low. A weaker dollar makes greenback-priced bullion cheaper for overseas buyers. Gold tends to have a negative correlation with the dollar and interest rates as it does not bear interest and is priced in the US currency.

“The market still expects the Fed (Federal Reserve) to

slow their pace of tightening,

which is providing support to gold,” said City Index analyst Matt Simpson, referring to the strong job data.

Data released last Friday showed that

US employers hired more workers than expected in November

and increased wages, shrugging off mounting worries of a recession, but that will probably not stop the Fed from slowing the pace of its interest rate increases starting in December.

Market participants see a 91 per cent chance of a 50 basis-point rate increase at the Fed’s meeting in December.

Lower interest rates tend to be beneficial for gold as they reduce the opportunity cost of holding the non-yielding asset.

“Also, news that China is scaling back its Covid-19 restrictions means that gold demand will increase in the region, further supporting prices,” said Mr Simpson.

More cities in top gold consumer China announced an easing of coronavirus curbs on Sunday, as the country tries to make its

zero-Covid-19 policy

more targeted and less onerous after unprecedented protests.

The London Bullion Market Association is creating a database of Russian gold bars held by banks in London to help prevent sanctions evasion by Russian companies or the Russian central bank, the industry group said on Friday.

Spot silver rose 0.6 per cent to US$23.27 per ounce, platinum gained 1.1 per cent to US$1,025.50, and palladium climbed 0.9 per cent to US$1,917.29. The Bloomberg Dollar Spot Index declined by 0.3 per cent and is near a five-month low. REUTERS, BLOOMBERG