Gold Hits Two-Year High as Fed Seen Moving Closer to Rate Cut

(Bloomberg) -- Spot gold climbed to close at the highest in more than two years after the Federal Reserve signaled a readiness to cut U.S. interest rates, citing increased economic uncertainties.

While policy makers left their key rate unchanged on Wednesday, they dropped a reference in their statement to being “patient” on borrowing costs and forecast a larger miss of their 2% inflation target this year.

Gold has posted four straight weekly gains, partly on bets that the Fed will lower interest rates amid signs that escalating trade disputes are affecting the U.S. economy. Low rates are a boon to precious metals, which don’t offer yields.

“Even though the Fed didn’t cut rates, the market expectation for a dovish environment and a likely rate cut in July are positive for gold,” Maxwell Gold, the New York-based director of investment strategy at Aberdeen Standard Investments, said by email. “As concerns around slowing global growth and trade put further pressure on monetary policy globally, gold may see further support.”

The Fed still expects a strong labor market and inflation to be near its goal but “uncertainties about this outlook have increased,’’ the Federal Open Market Committee said in the statement following a two-day meeting in Washington.

Bullion for immediate delivery rose 1% to settle at $1,360.38 an ounce, the highest closing price since August 2016.

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