Investing.com – Gold futures edged higher to hit a two-week high on Thursday, ahead of a widely expected interest rate hike by the European Central Bank later in the day, while concerns over inflation and the euro zone’s ongoing debt woes supported prices.
On the Comex division of the New York Mercantile Exchange, gold futures for August delivery traded at USD1,531.25 a troy ounce during late Asian trade, easing up 0.15%.
It earlier rose as much as 0.35% to trade at USD1,534.85 a troy ounce, the highest price since June 23.
The ECB was expected to raise its benchmark interest rate by 0.25% to 1.5% at its policy setting meeting later Thursday, after ECB President Jean-Claude Trichet said last week that the bank was in “strong vigilance mode.”
On Wednesday, the People’s Bank of China increased its key lending rate to 6.56% from 6.31%, the third rate increase this year and its fifth rate hike in the latest round of monetary tightening.
Global financial service provider HSBC said in a report late Wednesday that China’s move “reignited the inflation issue, which should bode well for gold”.
Rate hikes tend to dampen gold prices in the short term, but over the long run, gold still benefits from rising inflation as investors seek a hedge against accelerating consumer prices.
Meanwhile, concerns over the euro zone’s ongoing debt crisis continued to underpin safe haven demand for the precious metal after ratings agency Moody’s downgraded Portugal’s credit rating to junk status earlier in the week.
But gains were limited by a stronger U.S. dollar. The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.13% to trade at 75.49, hovering near an eight-day high.
A stronger dollar saps demand for raw materials as an alternative investment and makes metals priced in the currency more expensive in terms of other monies.
Elsewhere, silver for September delivery added 0.2% to trade at USD35.98 a troy ounce, while copper for September delivery edged 0.3% higher to trade at USD4.346 a pound.
On the Comex division of the New York Mercantile Exchange, gold futures for August delivery traded at USD1,531.25 a troy ounce during late Asian trade, easing up 0.15%.
It earlier rose as much as 0.35% to trade at USD1,534.85 a troy ounce, the highest price since June 23.
The ECB was expected to raise its benchmark interest rate by 0.25% to 1.5% at its policy setting meeting later Thursday, after ECB President Jean-Claude Trichet said last week that the bank was in “strong vigilance mode.”
On Wednesday, the People’s Bank of China increased its key lending rate to 6.56% from 6.31%, the third rate increase this year and its fifth rate hike in the latest round of monetary tightening.
Global financial service provider HSBC said in a report late Wednesday that China’s move “reignited the inflation issue, which should bode well for gold”.
Rate hikes tend to dampen gold prices in the short term, but over the long run, gold still benefits from rising inflation as investors seek a hedge against accelerating consumer prices.
Meanwhile, concerns over the euro zone’s ongoing debt crisis continued to underpin safe haven demand for the precious metal after ratings agency Moody’s downgraded Portugal’s credit rating to junk status earlier in the week.
But gains were limited by a stronger U.S. dollar. The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.13% to trade at 75.49, hovering near an eight-day high.
A stronger dollar saps demand for raw materials as an alternative investment and makes metals priced in the currency more expensive in terms of other monies.
Elsewhere, silver for September delivery added 0.2% to trade at USD35.98 a troy ounce, while copper for September delivery edged 0.3% higher to trade at USD4.346 a pound.