Gold shines as dollar dips on Fed rate hesitation

Bengaluru — Gold prices held near a more than one-week high on Wednesday, as the dollar edged lower after several US Federal Reserve officials suggested that the recent surge in treasury yields might make further rate hikes less necessary.

Spot gold was trading at $1,860.29 per ounce by 3.29am GMT, after hitting its highest level since September 29 on Tuesday. US gold futures held their ground at $1,873.90.

The dollar dipped to a nearly two-week trough against a basket of currencies, tracking a slide in US treasury yields that have retreated from their 2007 highs scaled last week.

Investors considered whether tightening financial conditions may have reached a peak after dovish commentary from Fed officials, despite the conflict in the Middle East continuing to roil markets, NAB said in a daily note.

Minneapolis Fed President Neel Kashkari on Tuesday said it’s “possible” that the recent rise in longer-term treasury yields means the US central bank need not raise interest rates as much as otherwise, while Atlanta Fed President Raphael Bostic sees no more US rate hikes.

With US inflation down from its peak, the risk of raising interest rates too little no longer far outweighs the risk of raising rates too much, San Francisco Fed President Mary Daly said.

Higher rates raise the opportunity cost of holding gold, which is priced in dollars and does not yield any interest.

Gold prices rebounded from recent seven-month lows as Mid-East tensions fuelled safe-haven demand for bullion, but its next move depends on this week’s US inflation data, pivotal to determining Fed’s upcoming rate trajectory.

The Fed’s September meeting minutes due later in the day would also be scanned for rate cues.

Elsewhere, spot silver rose 0.1 % to $21.83 per ounce, platinum gained 0.2% to $881.92 and palladium added 0.1% at $1,170.71. 

Reuters