Gold heads for first weekly gain in three as Fed hurts dollar

Posted March 19, 2017

A global stocks index touched a fresh record high on Friday, wrapping up a week when numerous world's major central banks either raised interest rates or signalled they might do so, underlining confidence about economic growth and inflation.

The pan-European STOXX 600 index rose 0.7 percent and touched its highest level since December 2015, helped by the Fed's dovish tone and the Dutch election results.

The Australian and New Zealand dollars remained stronger, with AUD/USD up 0.23% at 0.7694 and with NZD/USD gaining 0.30% to 0.7007. It hit a five-week low on Thursday, and is down nearly 1 percent for the week.

Prices on benchmark 10-year Treasuries fell 8/32 to yield 2.531 percent, up from 2.504 percent late on Wednesday. Investors were also watching a meeting of global finance chiefs in Germany beginning on Friday.

Both crude contracts lost more than one percent after data emerged showing key producer Saudi Arabia increased production last month, raising questions about the OPEC cartel's reduction commitment, just as United States shale output expands.

Dutch centre-right Prime Minister Mark Rutte fought off the challenge of anti-Islam and anti-EU rival Geert Wilders to score an election victory that was hailed across Europe on Thursday by governments facing a rising wave of nationalism.

The MSCI world equity index, which tracks shares in 46 countries, jumped 0.7 per cent on the day to reach an all-time high after the Fed lifted its funds rate by 25 basis points, but said further increases would only be "gradual".

On Wall Street, the benchmark S&P 500 index slipped after gaining sharply on Wednesday in the wake of the U.S. Federal Reserve's rate decision.

Elsewhere, GBP/USD held steady at 1.2364, off an earlier two-week peak of 1.2399. It is set to end the week up 0.9 percent.

Sterling inched lower to $1.2351. On Thursday, it jumped to a two-week high after a decision by the Bank of England to hold interest rates steady, while hinting it might raise them soon.

A protracted bout of weakness for the USA dollar would be seen as positive for commodities priced in the currency, said Richard Franulovich, a forex analyst at Westpac.

The euro was taking in the view at $1.0727, having climbed 1.2 percent overnight in its steepest rise since June. It touched its lowest level in 3 1/2 months early this week on concerns about a supply glut in the US, but data on Wednesday showing a small decline in stockpiles there helped lift prices.

Global benchmark Brent added nearly 0.1 percent to $51.77 a barrel, and was headed for a 0.8 percent weekly gain.

Spot gold gained 0.7 percent at $1,227.43 an ounce by 3:03 p.m. EDT (1903 GMT), after touching $1,233.13, the highest since March 6. It was poised to gain 1.9 percent for the week, its first in three, driven by the Fed's more moderate monetary policy stance.