Gold price rises as traders weigh Fed rate path after Warsh remarks

Gold rose as traders weighed the outlook for US monetary policy following Federal Reserve Chairman Kevin Warsh’s remarks at an annual central banker gathering.

Bullion climbed as much as 2.5% as the dollar and bond yields pared gains. Warsh repeated that he isn’t going to offer “forward guidance” with regard to upcoming rate policy, marking a step-change at the Fed, he said Wednesday at the European Central Bank’s annual Forum on Central Banking in Sintra, Portugal.

He also said price risks have come down in recent weeks, while repeating his determination to bring inflation back to the US central bank’s 2% target.

“Mr. Warsh is staying on message, which is helping gold. Gold traders were fearing that he may come in a bit more hawkish,” said Bart Melek, global head of commodity strategy at TD Securities.

After setting a record in January, the metal has been hurt by speculation that the Fed may hike rates this year to tackle sticky inflation, despite the declines seen in energy costs following the interim US-Iran peace deal. Higher borrowing costs are a headwind for non-yielding metals.

Spot gold traded 2.4% higher to about $4,103.98 an ounce at 10:23 a.m. in New York. The Bloomberg Dollar Spot Index, a gauge of the US currency, rose 0.1%. Silver gained 4%. Platinum and palladium advanced.

(By Yvonne Yue Li)