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Gold Prices Advance towards Resistance on Weak Dollar and Cautious FOMC Minutes, Palladium Hits 16-Year High

GOLD PRICES rallied towards its resistance level this Thursday morning in London, while the US Dollar remained weak after rather dovish hints from Fed officials suggesting that the next rate hike may be further postponed, writes Steffen Grosshauser at BullionVault.

Gold briefly touched $1289 per ounce before dropping back to $1286 failing to reach the resistance level of $1294 and the psychological barrier of $1300. 

The metal started its rise from $1268 on Thursday afternoon after the release of Fed minutes from the July FOMC policy meeting, according to which policymakers grew increasingly concerned about the sluggish inflation numbers. Whilst also on Thursday US President Donald Trump fell out with business leaders over his response to the recent turmoil in Charlottesville.

"In the shorter term, and in the absence of any geopolitical headlines, traders should watch the performance of the dollar against its G-10 peers for clues to gold's short term direction," said market analyst Jeffrey Halley at currency data provider OANDA.

Palladium, meanwhile, rallied to a new 16-year high at $923 per ounce, while silver and platinum saw a slight correction. In the first half of 2017, palladium prices increased 45% year-on-year.

"Palladium took some inspiration from the more industrially oriented metals," said UBS Wealth Management analyst Dominic Schnider, pointing to the current record prices of base metals and zinc's jump near a 10-year high.     

"Strong demand from the automotive industry - up 4% on year - driven by increase in SUV sales globally, ongoing shift away from diesel to gasoline engines in Europe and tightening emission legislation" were factors in the price rise, explained a spokesperson from Russian palladium miner Norilsk.

Meanwhile, the Euro declined and European shares halted a 3-day rise - their longest in a month - ahead of the European Central Bank's release of its last policy meeting minutes. ECB President Mario Draghi is not expected to deliver "a big monetary policy speech" at the Economic Policy Symposium conference at Jackson Hole on August 24-26, as one unnamed source said.

Gold for UK investors hit £1000 - the highest since 14 June - while British consumers are trying to cut costs at the fastest pace in two years, according to a new survey carried out by Nielsen. As household incomes were affected by the Sterling's sharp depreciation after the Brexit referendum and hence rising import costs, 53% of Britons were reported to have cut their spending in the second quarter of this year.

Over in India, the government banned exports of gold jewellery and other products above 22 carats in an attempt to reduce "round-tripping", at which "some exporters were availing of export incentives by claiming export of gold items of above 22 carat purity with some value addition," according to an official of the Gems and Jewellery Export Promotion Council (GJEPC).

"This is not possible as India is a net importer of gold and no trader would import above 22 carats gold and export it as it is without value addition. This is not a financially viable business," the GJEPC official added.

Steffen Grosshauser is Senior Operations Executive and Head of German-speaking Market at BullionVault, the worldwide biggest physical gold and silver market for private investors.

See all articles by Steffen here.

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