Gold re-starts rally as Fed stimulus hopes get entrenched

Gold advanced on Wednesday, halting its longest losing streak in nearly six months, as the dollar fell on strengthening expectations that the Federal Reserve will extend its monetary stimulus.

Fed policymaker John Williams said the central bank should wait for stronger evidence of growth before trimming its bond-buying program, which helped balance outdata on Tuesday showing a surprisingly strong U.S. service sector.

The timing of any tapering of the Fed’s $85 billion in monthly bond purchases has been a major factor driving gold prices this year. The metal has lost a fifth of its value so far on fears the Fed would start cutting back its stimulus.

Recent mixed economic data has cast doubts over the real strength of the U.S. economy, leaving some in the market to speculate that the Fed could act before year-end.

Spot gold rose 0.4 percent to $1,316 an ounce on Wednesday. The metal had dropped 3 percent over the past seven sessions, and analysts still saw it as vulnerable to a break below the $1,300 mark if U.S. data continues to show a pick-up in the economy.

U.S. gold futures for December delivery gained 0.6 percent to $1,316 an ounce.