Gold price hits three-week high

The yellow metal has been bid higher amid uncertainty over Federal Reserve interest rates.

The next clue on the timing of a Fed rate increase will come on Friday. Picture: The Australian / Renee Nowytarger.

Gold traded at a three-week high in London Tuesday on the back of a weaker dollar and uncertain timing for a rate increase by the US Federal Reserve.

Spot gold traded up 0.40 per cent at $US1.358.78 per metric ton in midmorning European trade, its highest point since July 11.

The WSJ Dollar Index, which measures the dollar against a basket of other currencies, was trading down 0.33 per cent on Tuesday. A weaker dollar makes dollar-denominated commodities, including gold, more affordable for investors who hold other currencies.

Gold has risen in recent days on the back of a weaker-than-expected 1.2 per cent growth in the US gross domestic product in the second quarter.

Weaker growth in the US is typically bullish for gold, as it raises the likelihood that the US Federal Reserve won’t raise interest rates in the near future.

However, the timing of such an increase remains uncertain, said David Govett, head of precious metals at brokerage Marex Spectron in London.

“The Fed seemingly is in hold mode, which is positive for gold, but every once in a while they let slip that September is still a possibility for a rate rise,” said Mr Govett.

A higher interest rate would push up rates for other instruments, including Treasurys. Gold, which doesn’t bare interest but is often used as a haven, may struggle to compete if rates rise.

The next clue on the timing of an increase will come on Friday, when the US Labor Department releases nonfarm payroll figures for July.

With summer holidays in full swing and few fundamental cues before Friday, trading volumes are likely to remain thin, said Robin Bhar, head of metals research at Société Générale.

“I think [gold is] really going to struggle and we’re going to tread water until the Friday jobs period,” said Mr Bhar. However, he said bullish news for the metal now appears largely priced in.

On Tuesday, silver traded 0.68 per cent higher at $US20.64 an ounce, and platinum gained 0.78 per cent to $US1,172 a troy ounce.

- Dow Jones newswires