Mubasher: Gold prices hit their highest since more than five years on Thursday after the Federal Reserve hinted future interest rate cuts later this year, dragging the US dollar and Treasury yields down, Reuters reported.

By 8:00 am GMT, spot gold rose by 1.53% to $1,381.14 per ounce, after touching $1,386.30 per ounce, its highest since 17 March 2014, while US gold futures surged by 2.70% to $1,385.20 per ounce.

The Fed on Wednesday indicated a willingness to cut borrowing costs, starting next month, in response to growing global and domestic economic risks, amid escalating trade tensions and mounting worries about tepid inflation.

Even with the Fed retaining its interest rate for now, the turn in sentiment since its last meeting weakened the dollar and Treasury yields.

Lower interest rates reduce the opportunity cost of holding non-yielding metal and pressure the dollar, making gold more affordable for non-US currency holders.

By 8:08 am GMT, the US dollar index, which measures the greenback against a basket of six major peers, fell by 0.44% to 96.69.

With this price surge, “the target for gold investors has moved to $1,400 and the key is to sustain this momentum for this week,” Phillip Futures analyst Benjamin Lu was quoted by Reuters.

However, such level would be difficult to remain, as investor appetite would be moving to equities, with more favourable conditions for riskier assets due to rate cuts, Lu added.