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Gold edges down on firmer stocks, dollar; Fed minutes in focus

Gold edges down on firmer stocks, dollar; Fed minutes in focusBENGALURU: Gold prices edged lower on Wednesday as equities and the dollar gained amid waning risk-averse sentiment, with the market awaiting minutes from the U.S. Federal Reserve’s latest policy meeting for fresh clues on the pace of interest rate hikes.

Spot gold was down 0.2 percent at $1,222.74 per ounce at 0748 GMT, but still near a 2-1/2-month high of $1,233.26 per ounce hit on Monday.

U.S. gold futures were down 0.4 percent at $1,226.6 an ounce.

“The newly minted gold bulls are getting nervous as they haven’t bought at good levels. They were in pretty much at the top and we see those guys exiting the market,” said Stephen Innes, APAC trading head at OANDA in Singapore.

Asian equities rose on Wednesday and the dollar strengthened against most major peers after upbeat U.S. earnings reports drove a rebound on Wall Street and reduced global appetites for safe-haven assets.

The firming in equities and the dollar has led to the market discounting U.S. President Donald Trump’s latest criticism of the Fed, which should have otherwise been supportive of gold, a Singapore-based trader said.

Trump heaped more criticism on the Fed, calling it ‘my biggest threat’ in an interview with Fox Business Network on Tuesday.

Last week, Trump criticized the U.S. central bank twice, saying it was raising interest rates so swiftly that it threatened the country’s economic health.

The Fed raised interest rates last month for the third time this year and said it planned four more increases by the end of 2019 and another in 2020.

“The current case of interest rates normalisation is quite cemented and this is taking a little bit of the froth off gold markets,” Innes said.

The release of the minutes from the Fed’s September policy meeting is due at 1800 GMT, Wednesday.

“FOMC minutes are about to be released today and because of that we have some recovery in the dollar index… Overall, FOMC minutes should be hawkish with regards to interest rate hikes,” said Ajay Kedia, director at Kedia Commodities.

Higher interest rates tend to boost the dollar and push bond yields up, putting pressure on gold prices by increasing the opportunity cost of holding non-yielding bullion.

Spot gold still targets a range of $1,208-$1,217 per ounce, as it failed to break a strong resistance at $1,235, according to Reuters technical analyst Wang Tao.

“Bullion exhibited further weakness during Asian trade on Wednesday, albeit in relatively uninspiring trade with Hong Kong out for Chung Yeung Festival,” MKS PAMP Group traders said in a note.

In other metals, silver dipped 0.5 percent to $14.57 per ounce, platinum fell 0.5 percent to $833.25 per ounce, and palladium was down 0.1 percent at $1,078.0.

Copyright Reuters, 2018

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