Gold prices reach a six-week high after the Fed's decision on interest rates sends the US dollar tumbling

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Gold prices moved after the US dollar was weakened by the Fed's decision (Source: Getty)

Gold prices jumped to a six-week high today, reaching as much as $1,270.90 per ounce, as precious metals were boosted by a decline in the US dollar.

The greenback tumbled to a 13-month low last night after the US Federal Reserve held interest rates at between one and 1.25 per cent. The US dollar index, which measures the dollar against a basket of currencies, fell to a two-year low.

The yellow metal was trading 1.05 per cent higher at $1,268.80 per ounce at the time of publishing.

“The US Federal Reserve may think it is talking tough but the financial markets clearly don’t think so, judging by new all-time highs in US stocks, a 13-month low in the dollar and six-week high in gold," said Russ Mould, investment director at AJ Bell.

 

Carsten Menke, commodities research analyst at Julius Baer, said support for precious metals from a weak US dollar is expected to run out of steam.

The weakness of the dollar is a key driver for gold and silver this year. 

Considering the solid growth backdrop in the United States and the outlook for rising interest rates, support from a weaker dollar to the precious metals should fade.

Menke said gold investment demand is still low as holdings of physically-backed gold products fell another 14 tonnes this week for a total decline of 50 tonnes this month.

Menke said:

The lack of investment demand puts the recent recovery on a rather weak footing in our view.

Read more: Gold prices climb past $1,255 on a weak US dollar

Tags: Gold prices