Gold dips on rosy US economic outlook and hawkish Fed comments

Bengaluru — Gold prices inched down on Thursday, after upbeat US economic data and hawkish comments from Federal Reserve policymakers raised the prospects of the central bank sticking to its tighter monetary policy. That boosted the dollar.

About half of the Fed’s policymakers, including chairman Jerome Powell, used public appearances on Wednesday to show an increasingly unified view that the US economy was not headed for any obvious potholes.

Further supporting the dollar was data showing strength in the US jobs market, with services sector activity racing to a 21-year high in September.

Spot gold inched down 0.1% to $1,196.25 an ounce at 4.47am GMT, after falling about 0.5% in the previous session. Prices held to a narrow range between $1,195.36 and $1,198.93 on Thursday.

US gold futures were down 0.3% at $1,199.9 an ounce.

“Gold remains heavy due to strong US economic data which supports the emerging hawkish Fed narrative, underpinning the dollar sentiment,” said Stephen Innes, Asia-Pacific trading head at Oanda in Singapore.

The Fed raised US interest rates last week and said it planned four more increases by the end of 2019 and another in 2020, citing steady economic growth and a robust jobs market.

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 nonyielding bullion.

“The dollar is very strong and putting gold under pressure…. People are now buying the dollar,” said Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong.

The dollar index marked a fresh six-week peak against its peers on Thursday.

Gold prices have fallen for the past six months, losing more than 12%, largely due to dollar strength, with the US currency benefiting from a vibrant US economy, rising US interest rates and fear of a global trade war.

Investors are watching for the US nonfarm payrolls data due on Friday. According to a Reuters survey of economists, nonfarm payrolls likely increased by 185,000 in September after jumping 201,000 in August.

Spot gold may test a support at $1,193 an ounce, a break below which could cause a loss to the next support at $1,188, while a break above $1,201 could lead to a gain to $1,207, according to Reuters technical analyst Wang Tao.

Safe-have interest in gold was dented, as the Italian government indicated it was open to trimming its budget deficit and debt, easing fear about fiscal policy in the eurozone’s third-biggest economy.

Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.84% to 23,522,860.09 ounces on Wednesday, the lowest since February 2016.

Among other precious metals, silver was little changed at $14.58 an ounce.

Palladium was flat at $1,055.22 and platinum was down 0.6% at $817.5 an ounce.

Reuters