Gold touched its highest price in six weeks on Thursday, lifted by short-covering and a weak dollar as investors bet that U.S. interest rates could be kept low for longer.
The U.S. Federal Reserve kept interest rates unchanged on Wednesday, but appeared less confident than it had about inflation picking up.
The resulting fall in the greenback is a boon for dollar-denominated gold since it makes the metal less expensive for investors paying in other currencies.
“Gold has been benefiting a lot recently from the weaker U.S. dollar plus some short-covering on the futures market, where you’ve had record short positions,” analyst Carsten Menke at Julius Baer in Zurich said.
“The normalisation of positioning will leave about a 4-5 percent upside from these levels, based on history, which would be towards $1,300.”