Gold gets saved as rate rise is deferred

Chinese firms could have locked up as much as 1,000 tonnes of gold in financing deals

The Federal Reserve just rescued gold, at least for a while.
Bullion is headed for the first weekly gain in four after US central bankers on Thursday stood pat on rates. The decision by the Federal Open Market Committee is fueling debate over the strength of the American economy. That's good news for gold bulls, who have suffered through more than two years of declining prices.
"Ultimately, lower-for-longer on the rate front will boost precious metals," Jordan Eliseo, chief economist at trader Australian Bullion in Sydney, said by e-mail on Friday. "Gold rallied as the FOMC appeared very dovish - with noticeable concern regarding the outlook for growth and inflation."
Prices rallied as much as 1.3 per cent to $1,133.93 on Thursday, the highest since September 3. Bullion for immediate delivery traded 0.1 per cent lower at $1,130.07 an ounce at 2:07pm in Singapore, paring this week's advance to two per cent, according to Bloomberg generic pricing.
Trading volume was languishing before this week's Fed meeting, and prices had dropped to near one-month lows. Investors have snubbed precious metals as job growth boosted speculation that the Fed was ready to lift rates, even as inflation remained below the central bank's target. Spot gold declined 5.5 per cent this year as of Wednesday. Higher rates hurt bullion because the commodity doesn't pay interest, unlike some competing assets.
"Gold prices are still likely to follow a gradual downward trend just because of the global environment, which despite short-term volatility, has still a relatively positive outlook led by the US," Vyanne Lai, an economist at National Australia Bank in Melbourne, said by phone on Friday.
"The overall global general macro environment is still looking like it's going to grow close to trend rate, which is going to be bearish for gold."
The bank is forecasting a December rate increase, with gold seen at $1,076Â an ounce at the end of this year, Lai said. Fed-fund futures show a 44 percent chance of an increase in December with odds going up to 52 per cent in January, based on data compiled.

• Gold and Forex