Gold off 10-month peak as Fed minutes support dollar

An employee stores newly cast ingots of 99.99% pure gold at the Krastsvetmet non-ferrous metals plant, one of the world’s largest producers in the precious metals industry, in the Siberian city of Krasnoyarsk, Russia. (Reuters pic)

BENGALURU: Gold was trading below the previous session’s 10-month peak on Thursday as the dollar inched up after minutes from the last Federal Reserve meeting rekindled expectations of another rate hike this year.

Investors were also keeping a close eye on talks to end a trade dispute between China and the United States.

Spot gold had inched up by 0.1% to US$1,339.88 per ounce as of 0529 GMT, having touched US$1,346.73 per ounce in the previous session, its highest level since Apr 19.

US gold futures were down 0.4% at US$1,342.8 an ounce.

“There are both technical and fundamental reasons for this pullback in gold prices. It is under some technical selling pressure at the moment,” said Margaret Yang, market analyst with CMC Markets, Singapore.

“It was a clearly dovish statement by the Fed,” she said adding that the dollar rebounded after the minutes and gold traders are now taking profits.

The dollar index against a basket of six major currencies was steady at 96.518.

The Fed, in the minutes of its latest meeting in January, said the US economy and its labour market remained strong, prompting some expectations of at least one more interest rate hike this year.

Higher interest rates make gold less attractive since it does not pay interest and costs to store and insure.

Spot gold may retrace into a range of US$1,321-US$1,331 per ounce and could have peaked around resistance at US$1,351 per ounce, according to Reuters analyst Wang Tao.

Markets were still on the lookout for signs of progress in the latest round of trade negotiations between the United States and China, amid expectations that US President Donald Trump will meet Chinese President Xi Jinping next month to strike a deal.

Trump said on Tuesday that trade negotiations were going well and suggested he was open to pushing off the Mar 1 deadline to complete negotiations.

“After finding major support at the US1,300 per ounce mark, (gold) prices have witnessed an upthrust, and moved past the invincible US$1,326 per ounce mark,” said Sugandha Sachdeva, vice-president, metals, energy and currency research, Religare Broking.

“This has set the path for gold to traverse on the upwards trajectory towards US$1,365 per ounce in the near-term.”

Reflecting investor appetite for bullion, holdings of the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.26% to 794.50 tonnes on Wednesday.

Among other precious metals, palladium rose 0.1% to US$1,490.00 per ounce.

The autocatalyst metal had surpassed the crucial $1,500 psychological level the previous session on market supply woes.

Spot platinum dipped 0.2% to US$821 an ounce, while silver was down 0.1% at US$16.01.