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Gold Trades Higher In Europe

21-Dec (WSJ) — Gold prices were higher on the London spot market Monday, as a flat dollar and thinner seasonal volumes allowed market bulls to propel prices higher following recent sell-offs in the wake of a U.S. rate rise.

Spot gold was up 0.6% at $1,072.12 a troy ounce in morning European trade, having hit a three-day high earlier in the session at $1,074.11 an ounce.

Prices fell towards near six-year lows last Thursday, after the Federal Reserve raised rates for the first time in nearly a decade.

The move by the U.S. central bank caused the dollar to firm, which put pressure on the dollar-denominated commodity. Additionally, gold offers no yield and finds it more difficult to compete with yield-bearing assets when rates rise.

With rates still ridiculously low, there’s still not much competition there. However, yield is compensation for risk and since gold — in its physical form in the investors possession — carries no risk, of course it carries no yield. And that is actually quite an appealing attribute.