World gold prices continued to maintain their upward momentum in the session of September 18 as the USD weakened, oil prices fell and US bond yields cooled down. The market is still focusing on assessing the impact of the latest interest rate decision of the US Federal Reserve (Fed).
Previously, gold prices had increased by nearly 2% in the session of September 17, thereby compensating for most of the decrease in the previous three sessions. The upward momentum helped the precious metal return above the 100-day moving average - an indicator often monitored to assess price trends.
The weakening USD continues to create support for gold. As the greenback depreciates, gold valued in USD becomes more attractive to buyers holding other currencies.
Oil prices also fell for the third consecutive session as concerns about supply disruptions cooled down. Reduced energy prices contributed to easing inflationary pressure, thereby supporting the gold market.
Mr. David Meger - Director of Metal Trading at High Ridge Futures - said that gold prices are closely related to energy prices. According to him, the cooling of oil prices is helping to reduce pressure on the gold market.
Meanwhile, US Treasury bond yields fell across many terms. Previously, a sharp increase in yields after the Fed's decision put pressure on gold, because precious metals do not pay interest and are often less attractive when bond yields rise.
The Fed has increased interest rates by another 0.25 percentage points on September 16 and signaled that it may continue to raise interest rates. According to the CME Group tool, traders are currently forecasting a 51% chance of the Fed raising interest rates in October, up from nearly 44% previously.
Although high interest rates are still a factor putting pressure on gold, the precious metal still maintained its upward momentum after the Fed's decision. Spot gold prices at one point increased by 1.48%, to 4,325.60 USD/ounce.
According to UBS - a Swiss financial group - increased budget deficit, high debt burden, weakened USD and expectations that the Fed's monetary policy easing next year may continue to support gold prices.
In the UK, the Bank of England (BoE) kept interest rates unchanged at 3.75% after the September policy meeting. Three members of the Monetary Policy Committee voted in favor of raising interest rates by an additional 0.25 percentage points.
