Gold falls on hawkish Fed, but trade worries limit losses

Bengaluru — Gold prices eased on Thursday as the US Federal Reserve forecast a slightly faster pace of interest rate hikes this year, although lingering concern over the trade tension between Washington and Beijing prevented steeper losses.

Spot gold was down 0.1% at $1,298.51/oz at 3.49am GMT. It touched an over one-week low at $1,292.15/oz in the previous session.

US gold futures for August delivery rose 0.1% to $1,302.20/oz.

“It [the rate hike] is all priced in and obviously there are a lot of uncertainties looking past this which is supporting gold prices in our view,” said Richard Xu, a fund manager at HuaAn Gold, China’s biggest gold exchange-traded fund (ETF).

“Its muted response to the Federal Reserve increase is because a lot of safe-haven demand is going to take place.… The trade war drama is not going to end anytime soon, it is probably going to be exasperated over the next month or so.”

The US Federal Reserve raised interest rates on Wednesday, and signalled two additional hikes by the end of this year, compared to one previously. Expectations of further US interest rate increases lowers demand for the non-interest-paying asset.

However, reports that US President Donald Trump will meet with his top trade advisers on Thursday to decide whether to activate threatened tariffs limited gold’s losses.

“Reports that President Trump was preparing to put tariffs on billions of dollars of Chinese goods as soon as Friday raised concerns in the market that economic growth would be impacted. This saw some safe-haven buying emerge,” ANZ said in a note.

“Investor demand was also supported by a slightly weaker US dollar in the wake of the Fed decision to raise interest rates.”

The dollar slipped back from three-week highs against the yen on Thursday. Markets are now looking forward to policy announcements from the European Central Bank (ECB) later in the day where the bank will debate whether to end its huge asset purchases by year-end.

In other precious metals, silver fell 0.2% to $16.97/oz. It hit its highest since April 23 at $17.11 on Wednesday.

Platinum was 0.4% lower at $895.55/oz, while palladium was nearly unchanged at $1,008.95/oz.

Reuters