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Thank the Fed.

Gold is poised for its biggest weekly gain in six after the Federal Reserve on Wednesday raised rates in line with expectations, but stuck to its forecast of just two additional rate rises this year and as chair Janet Yellen reiterated that further interest rate rises will be gradual.

Ahead of the meeting some had come to expect that the Fed could signal that it was accelerating tightening but the absence of such a signal helped the precious metal, which offers no yield, advance 2.1 per cent over the week to $1,229.46 a troy ounce.

Moreover, the more dovish tone prompted the US dollar to weaken, declining 0.9 per cent over the week against a basket of peers — the biggest weekly drop in nine weeks. Weakness in the US dollar helps lift gold, which is denominated in the currency, as it makes it cheaper to foreign buyers.

And looking ahead”the price risks are skewed to the upside given the raft of political uncertainty stemming from both the US and Europe,” says Suki Copper, analyst at Standard Chartered. “Market focus will shift the first round of the French elections (23 April 2017) as well as Britain’s formal exit from the EU.”

Moreover, she expects seasonal demand in India to pick up as well. Following the demonetisation — that saw the government issue an overnight ban on Rs500 and Rs1,000 notes — in November, major cash purchases like gold, motorcycles and property took a hit. But effects of demonetisation are believed to be fading.

“We expect gold to follow in the footsteps of other cash purchases and recover as the gold-buying festival of Akshaya Ttitiya (28 April 2017) approaches, particularly as there was much pent-up demand following the Union budget, from which the market eagerly awaited tax cuts,” she added.

Copyright The Financial Times Limited 2017. All rights reserved.
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