Firming dollar takes the shine off gold’s six-day winning streak

Bengaluru — Gold prices slipped on Thursday, weighed down by a stronger dollar after minutes from the US Federal Reserve’s last meeting highlighted inflationary pressure and confirmed that asset purchases tapering is on the cards in 2021.

Spot gold was down 0.3% at $1,797.46/oz, as of 3.31am GMT, after posting a sixth consecutive day of gains.

US gold futures eased 0.2% to $1,798.80.

“Following FOMC [federal open market committee] minutes, there was a modestly positive response from the dollar and a negative response from gold,” said DailyFX currency strategist Ilya Spivak.

“As we get digestion over those FOMC minutes, we’re starting to get some concern that perhaps we are looking at a situation where the Fed is starting to shift its focus to fighting inflation.”

The dollar index strengthened 0.1% to hover near the highest in three months versus its rivals, making gold more expensive for other currency holders.

Fed officials in June felt substantial further progress on the US economic recovery “was generally seen as not having yet been met”, but agreed they should be poised to act if inflation or other risks materialised, according to the minutes of the central bank’s June policy meeting.

Though gold is seen as a hedge against inflation, a Fed rate hike will increase the opportunity cost of holding bullion and dull its appeal.

Indicative of sentiment, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.2% to 1,040.48 tonnes on Wednesday.

The European Central Bank will on Thursday announce the outcome of an 18-month strategy review, redefining its inflation target and laying down what role it plans to play in the fight against climate change.

The Perth Mint’s gold sales fell to an eight-month low in June, but were higher year-on-year, while silver sales jumped to their highest level in more than a year, the refiner said in a blog post.

Elsewhere, silver dropped 0.8% to $25.92/oz, palladium fell 0.7% to $2,832.22, and platinum slipped 1.2% to $1,072.51. 

Reuters